Best 5 Due Diligence Checklists
Secure digital auditing tool for convenient due diligence
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What is a Due Diligence Checklist?
A due diligence checklist is a tool used by investors, business owners, and consultants in analyzing a company or organization that they’re acquiring through either a sale, merger or other methods. A due diligence checklist helps ensure that the final decision is based on a thorough investigation of all aspects of the business. It is also used to uncover red flags and determine if the current value of a company makes it a wise investment.
This article will briefly discuss (1) where common red flags are found during due diligence, (2) powerful mobile tool for conducting due diligence, and (3) free digital due diligence checklists.
Where to Look for Red Flags During Due Diligence
Investors and consultants need to review key aspects of a business to determine if it will be worth the investment and find red flags that may negatively impact profitability. Here are some of the key aspects to look into and some key due diligence questions to ask:
Organization
Is the business in compliance with legal requirements? Is the company open to sharing requested company information or were there reservations?
Products and services offered
What is the business selling? Do the products and services meet required certification and legal criteria? How about the product development and manufacturing processes?
Finances
Review all financial records, including all debts acquired and taxes paid. Check for compelling reasons to investigate further and be wary of how the company manages its finances. Does the company exhibit transparency in providing access to financial records?
People
How are employees treated? How competitive is the employee benefit package? Is there a history of legal action initiated by or against employees? What is the professional history and reputation of the key executives?
Reputation
Public perception can impact profitability. Find out what the media, competitors, and the target market has to say about the business. How is the business’ corporate social responsibility? Any legal issues or environmental concerns raised against the company? What is the company’s overall reputation in the industry?
3 Major Types of Due Diligence
There are three main types of due diligence, these are: 1) Legal, 2) Financial, and 3) commercial. All three types help contribute in providing the right information thoroughly assessing the company of interest’s business, assets, capabilities, and financial performance.
Legal due diligence
Legal due diligence is the examination and review of legal documents and contracts. This includes exploring areas such as:
- Legal structure
- Contracts
- Loans
- Properties
- Employment
- Pending litigations
Financial due diligence
Financial due diligence focuses on verifying and evaluation of financial records of the target company. It covers areas such as:
- Earnings
- Assets
- Liabilities
- Cash flow
- Debt
- Management
Commercial due diligence
Commercial due diligence is the thorough understanding and examination of the market that the target company operates in. This involves activities such as conversing with customers, assessment of competitors and an analysis of the business plan.
iAuditor as a Company Due Diligence Tool
Conducting due diligence to assess the viability of businesses for investment, mergers, and acquisitions entails going through a lot of company records in as little time as possible. iAuditor, the world’s most powerful mobile auditing app, can help business owners and consultants conduct effective due diligence by providing the following benefits.
Convenient highlighting of findings
- Take photos using your mobile device to highlight findings during due diligence
- Make quick notes referenced to specific points on your checklist that you can easily review while creating the due diligence report
Digital record-keeping
- No more dealing with paper-based checklists and illegible handwritten notes that can get lost or damaged
- Paperless records can be shared via weblink or as a PDF or Word document
Secure information
- iAuditor uses secure cloud storage so there is no fear of leakage or unauthorized access to data
- Only designated or authorized person/s can access information
Continuity
- One go-to app for the duration of conducting due diligence
- Continue where you last left off and make updates based on findings
- Integrate iAuditor with other platforms as needed
Featured Due Diligence Templates
Due Diligence Checklist
A due diligence checklist can be used as a guide in conducting an analysis on a company with potential for investment. Use this due diligence checklist to determine profitability and risk during the decision-making process before a merger or acquisition. This converted checklist can be used by investors and consultants on their mobile device to do the following when doing due diligence:
- Capture photos of findings to be included in the due diligence report.
- Indicate if an item is a red flag, needs further review, or not applicable to the due diligence.
- Organize notes relevant to the items on the checklist.
- Go back and update the checklist anytime during the due diligence.
- Share findings via weblink or PDF/Word document.
Technical Due Diligence Checklist
A technical due diligence, sometimes called an IT due diligence, helps IT managers check all essential Information Technology assets of a business during mergers and acquisitions. This is crucial for streamlining the management of IT assets and processes. iAuditor digital checklists can be customized to fit business needs.
Operational Due Diligence Template
An operational due diligence template is used to review the operations of a business: customer patterns, competitors, marketing, and perception. This operational due diligence checklist uses the response set Done-In Progress-Not Applicable for each item.
Financial Due Diligence Checklist
A financial due diligence checklist is used as a guide to review the assets & liabilities and financial risks of a business. This financial due diligence checklist can be used by accountants or financial advisors to assess the financial standing of a business.
Legal due diligence checklist
A legal due diligence checklist is used by lawyers or legal advisors as a guide to check all legal documents and contracts for risks that may be hidden in legalese and uncover possible legal obligations.
