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Due diligence can be a legal obligation, but the term more commonly applies to voluntary investigations. It may also offer a defence against legal action. A common example of due diligence is the process through which a potential acquirer evaluates a target company or its assets in advance of a merger or acquisition. [1]
Typical due diligence includes discussions with management, vendors and customers, as well as proper evaluation of any risk factors that might affect the performance of the company or its securities. The modern interpretation of the "prudent man rule" goes beyond the assessment of each asset individually to include the concept of due diligence ...
This can be costly and time-consuming to both parties. Since due diligence can be a detective game, organizations must find individuals who can detect small issues and opportunities. Organizations sometimes bring in outside experts. [14] The expense of the due diligence process, and the time involved, can be softened by dividing it into two stages.
Usually city government has a duty of care to repair and maintain the sidewalk. In tort law, a duty of care is a legal obligation that is imposed on an individual, requiring adherence to a standard of reasonable care to avoid careless acts that could foreseeably harm others, and lead to claim in negligence.
The holder on due course rule allows banks to take an "empty head and pure heart" approach to buying loans, and to close their eyes to anything beyond the face of a promissory note when due diligence would reveal obvious irregularities in how that note was originated.
In an acquisition, a buyer often performs due diligence to verify the seller's information. Financial statements prepared in accordance with generally accepted accounting principles (GAAP) show many assets based on their historic costs rather than at their current market values.
Exporters demonstrating "reasonable care" should perform screenings on a periodic basis as well as perform screenings throughout the movement of the goods within the supply chain. With more country-specific rules being applied, countries have their own denied party lists, some of which include: [ 1 ]
Forensic accounting, forensic accountancy or financial forensics is the specialty practice area of accounting that investigates whether firms engage in financial reporting misconduct, [1] or financial misconduct within the workplace by employees, officers or directors of the organization. [2]