There have been a huge number of business opportunities in the world and especially in the middle east. People from all over the world are looking to come to the middle east in order to set up a company and conduct their business. But with the increase in the opportunity for business comes the opportunity to conduct fraud in the business. Every businessman needs to ensure that they take the full advantage of the growing business opportunities, but they do not increase the risks associated with it. This is where financial due diligence comes into play.
Let us understand what Due Diligence is and how it can affect the working of a business.
What is Financial Due Diligence?
Due Diligence can be explained as a process in which all possible information about a company if found out before its acquisition, restructuring, listing the company on the stock market, liquidation or and other such transaction of the company.
The primary intention behind conducting Due Diligence of a company is to reduce the risk associated with the company by getting the possible amount of knowledge about the company. In this way, the management will be able to make an informed decision about the company.
This process is gaining more importance in the middle east and especially in Dubai at it is the posterchild of the Middle East cities. It can simply be understood as the examination done before hiring the services of a person or entity.
Due Diligence in the UAE
The Due Diligence audit in the UAE zeros in on many aspects of the company. In the examination, not only on the historical aspect of the company is checked but also the predictions for its future are taken into consideration. With such knowledge, the investor in the country can very make an informed decision and the investor can decide if to invest in the company will be a profitable move or not.
The procedure of a Due Diligence Audit in the UAE
The due diligence audit is usually conducted before the sale of a business, its restructuring or in case any investment is to be made in the companies. The step by step process of the Due Diligence Audit is explained below:
1.Address the concerns of Compliance
The due diligence will audit conducted will help the management to understand if all the compliance requirements are being fulfilled and if not, what would be the repercussions of the business.
2.Define the objectives of the Due Diligence
Before conducting the Due Diligence audit of a company, the auditor should specify the objectives of the due diligence audit. it should be mentioned that what if the final aim of the audit and it should be mentioned that what are the findings of the audit.
3.Accumulate all the important Information
The auditor should accumulate all the possible information about the company so that after reading the audit report, the investor will be able to make an informed decision regarding the investments to be made in the company.
Here screening means to validate all the information which has been found out during the course of the audit. Much of the information will either be rumours or will not be applicable to the business. The auditor must sort all the information and provide the correct information in the audit report.
After the screening, the auditor must assess what is the risk faced by an investor upon investing in the company. This risk assessment should help in the decision, which is to be made by the investor.
6.Establish a plan for the Company
After reading the due diligence audit report of the business, the management should create a plan about whether they should invest in the company or not.
With such benefits, the investors should always conduct a due diligence audit of the companies to get complete information about the businesses.
To know more about Due Diligence Audit or any other type of Audit, you can consult the expert auditors at JAXA Chartered Accountants. Feel free to Contact Us. We will be glad to assist you on your business journey.