Comprehensive Financial Audit (Due Diligence) is a thorough investigation process conducted prior to an acquisition, merger, or any major business transaction falling under recognized auditing standards. The goal is to assess the financial, legal, and operational status of the target company to ensure that the investment decision is based on accurate and complete information. As an internal auditor.

Financial audit steps

1. Defining the Audit Scope

   • Objective Identification: Understanding the specific goals of the acquisition or investment.

   • Timeframe Determination: Defining the period covered by the Financial Audit.

2. Document Collection and Analysis

   • Financial Data: Reviewing audited and unaudited financial statements over several years, including balance sheets, income statements, and cash flow statements.

   • Tax Records: Examining tax returns such as income tax and withholding tax to ensure compliance.

   • Contracts and Agreements: Analyzing key contracts, including those with clients, suppliers, leases, and loans.

   • Legal Documents: Reviewing potential lawsuits and legal disputes.

   • Operational Reports: Studying operational reports as well as internal audit reviews to support Financial Audit.

3. Conducting Interviews

   • With Senior Management: Interviewing top executives to understand business strategies and future challenges.

   • With Key Departments: Interviewing department heads to grasp daily operations and operational risks, which are vital aspects of the Financial Audit.

4. Market and Industry Analysis

   • Market Study: Analyzing the market in which the company operates, including market share and competitors.

   • Industry Trends: Understanding current industry trends and future outlooks to support a context-aware Financial Audit.

5. Risk Evaluation

   • Financial Risks: Assessing financial risks such as liquidity, debt, and asset quality.

   • Operational Risks: Analyzing operational risks related to production and supply chain.

   • Legal Risks: Reviewing legal risks and compliance issues relevant to the Financial Audit process.

6. Reporting and Analysis

   • Data Compilation: Compiling and analyzing all gathered data.

   • Final Reporting: Preparing a detailed report that includes findings and recommendations, along with a summary for senior management and stakeholders, forming a key component of the Financial Audit.

Additional Steps May Include:

1. Reviewing Policies and Procedures:
   Analyzing company policies and procedures to ensure compliance and organizational structure.

2. Technology Infrastructure Review:
   Assessing IT systems and cybersecurity to support the integrity of the Audit.

3. Human Resources Analysis:
   Reviewing employment contracts and HR policies to assess employee stability and potential risks.

In conclusion, by following these procedures, the auditor can deliver an accurate and reliable assessment that aids in making informed investment decisions while reducing potential risks through a comprehensive Financial Audit.