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Ankit (Querist)
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08 February 2013 Who can prepare due diligence report.???
Can statutory auditor can prepare this report????

THANKS IN ADVANCE

bhupender soni

bhupender soni (Expert)
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10 February 2013 Question not clear due diligence report on which area
CS/CA/CWA Is eligible for preparation due diligence report
Statutory auditor also prepare if central gov given order on the subject matter

Ankit

Ankit (Querist)
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10 February 2013 Due Diligence Report on to purchase the stake in other company(Investment around 100 cr and percentage around 33%)

Bankers wants this Report

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Asha Kanta Sharma

Asha Kanta Sharma

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27 July 2024 ### **Who Can Prepare a Due Diligence Report?**

A Due Diligence Report is a critical document used in evaluating the financial, operational, and legal aspects of a company, especially when making significant investments or acquisitions. Here’s a breakdown of who can prepare such a report and related considerations:

#### **1. Types of Professionals Who Can Prepare Due Diligence Reports**

1. **Financial Due Diligence Experts:**
- **Chartered Accountants (CAs)**: Often, Chartered Accountants with expertise in forensic accounting and due diligence are engaged. They are well-versed in financial analysis, audit procedures, and regulatory compliance.
- **Certified Public Accountants (CPAs)**: In some regions, CPAs with due diligence experience may be involved, especially if the investment or acquisition crosses international boundaries.

2. **Legal Advisors:**
- **Corporate Lawyers or Legal Firms**: For legal due diligence, which involves assessing legal risks, contracts, and compliance, corporate lawyers or specialized legal firms conduct this part of the report.

3. **Consulting Firms:**
- **Management Consulting Firms**: Firms specializing in mergers and acquisitions (M&A) and business consulting often provide comprehensive due diligence services, including financial, operational, and strategic assessments.

4. **Investment Bankers:**
- **M&A Advisors**: Investment banks and M&A advisors also prepare due diligence reports, focusing on the valuation, financial health, and market position of the target company.

#### **2. Can Statutory Auditors Prepare Due Diligence Reports?**

- **Statutory Auditors:**
- **Statutory Auditors** can prepare due diligence reports, but with some considerations:
- **Independence**: The statutory auditor must ensure independence from the client to avoid any conflicts of interest.
- **Scope**: Statutory auditors are typically involved in financial audits, so their due diligence report will primarily focus on financial aspects. Comprehensive due diligence may require additional expertise in legal, operational, and market factors.
- **Expertise**: Statutory auditors with experience in due diligence and mergers and acquisitions will be more suitable for preparing detailed and accurate reports.

#### **3. Contents of a Due Diligence Report**

A comprehensive due diligence report typically includes:

1. **Financial Due Diligence:**
- **Financial Statements**: Analysis of historical financial statements.
- **Revenue and Profitability**: Evaluation of revenue streams and profit margins.
- **Cash Flow**: Examination of cash flow statements and working capital.
- **Debt and Liabilities**: Review of outstanding debts and liabilities.

2. **Legal Due Diligence:**
- **Contracts and Agreements**: Analysis of major contracts, leases, and agreements.
- **Compliance**: Assessment of regulatory compliance and legal risks.
- **Litigation**: Examination of ongoing or potential litigation.

3. **Operational Due Diligence:**
- **Business Operations**: Evaluation of operational efficiency, processes, and management.
- **Assets and Inventory**: Review of physical assets, inventory, and technology.

4. **Market and Strategic Due Diligence:**
- **Market Position**: Analysis of market position and competitive landscape.
- **Strategic Fit**: Evaluation of strategic alignment with the buyer’s objectives.

#### **4. Role of the Report in the Investment Process**

- **Bankers and Investors**: The due diligence report provides critical insights to bankers and investors, helping them make informed decisions about the investment.
- **Risk Assessment**: It identifies potential risks and areas requiring further investigation.
- **Valuation**: The report assists in determining the fair value of the investment or acquisition.

### **Summary**

- **Who Can Prepare**: Chartered Accountants, Certified Public Accountants, corporate lawyers, consulting firms, and investment bankers can prepare due diligence reports.
- **Statutory Auditors**: They can prepare the report, especially if they have expertise in due diligence, but may need to collaborate with other experts for a comprehensive analysis.
- **Report Contents**: Financial, legal, operational, and strategic aspects are typically covered.

For a transaction involving substantial investment (e.g., ₹100 crore) and a significant stake (e.g., 33%), a multi-disciplinary approach involving financial, legal, and strategic advisors is recommended to ensure a thorough due diligence process.