Financial due diligence is a thorough investigative process conducted before executing a major business transaction, such as an acquisition, merger, or any significant commercial deal that falls under the Approved review standards. The goal is to assess the financial, legal, and operational status of the target company to ensure the investment decision is based on accurate and complete information. As an internal auditor, the following procedures are typically performed when conducting comprehensive Financial Auditing :

 1- Defining the Scope of the Audit

•  Setting Objectives: Understand the specific goals of the acquisition or investment.
• Determining the Timeframe: Identify the period that the audit will cover.

 2- Document Collection and Analysis

• Financial Statements: Review audited and unaudited financial statements over several years, including balance sheets, income statements, and cash flow statements.
• Tax Records: Examine tax returns, such as income tax and withholding tax , to ensure tax compliance.
• Contracts and Agreements: Analyze key contracts, including those with customers, suppliers, leases, and loans.
• Legal Documents: Review potential lawsuits and legal disputes.
• Operational Reports: Study operational reports and internal reviews.

 3- Conducting Interviews

• Senior Management: Interview senior management to understand business strategies and future challenges.
• Key Departments: Interview department heads to gain insights into daily operations and operational risks.

 4- Market and Industry Analysis

• Market Study: Analyze the market in which the company operates, including market share and competitors.
• Industry Trends: Understand current industry trends and future projections.

 5- Risk Assessment

• Financial Risks: Evaluate financial risks such as liquidity, debt, and asset quality.
• Operational Risks: Analyze operational risks related to production and supply chain.
• Legal Risks: Review legal risks and compliance issues.

 6- Reporting and Analysis

• Data Compilation: Compile and analyze all gathered data.
• Final Reports: Prepare a detailed report that includes findings and recommendations, and present a summary to senior management and stakeholders.

 Additional steps may include:

Policy and Procedure Review:

• Analyze the company’s policies and procedures to ensure regulatory compliance.

Technological Infrastructure Assessment:

• Evaluate the company's IT systems and cybersecurity.

Human Resources Analysis:

• Review employment contracts and HR policies to assess employee stability and potential risks.

By following these procedures, the auditor can provide an accurate and reliable assessment, helping to make informed investment decisions while reducing potential risks.