Company Due Diligence Audit Checklist

Due diligence is used to investigate and evaluate a business opportunity. The term due diligence describes a general duty to exercise care in any transaction. It spans investigation into all relevant aspects of the past, present, and predictable future of the business of a prospective company. Due diligence sounds impressive but ultimately it translates into basic common sense success factors such as "thinking things through" and "doing your homework".  Use this due diligence auditing framework for evaluating all aspects of a business.
How often should this be used?
When pursuing a business purchase / acquisition.
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Company Due Diligence Audit

Corporate Matters - General

Organizational chart and management structure
Charter documents, operating agreements, by-laws, business licenses, certificates of authority and stock certificate
Board actions and minutes
Information and documentation on acquisition and/or disposals of subsidiaries, affiliates or major assets of the Company (last 5 years)

Corporate Matters - Facilities

List of all manufacturing facilities, representation offices, sales offices, establishments, storage facilities, warehouses and other Company facilities
Details on any facility openings or closing? (last 5 years)
Details on any facility turnarounds (last 5 years)

Finance - General

Audits (last 5 years and YTD)
Consolidated financials (last 5 years and YTD)
Consolidated quarterly financials (last 5 years and YTD)
Accounting reconciliation of all accounts for the most recent balance sheet available
Trial balances (last 5 years and YTD)
Description of any off-balance sheet commitments
Description of any contingent liabilities
Price and volume data by division and product annually
Annual P&L by location (last 5 years and YTD)
Details on raw materials and currency risk management (e.g. hedging)
Historical & projected cost & volume of key material inputs
Details on cash balances including cash in different jurisdictions and accounts
FX details (sales & costs by currency)
List of Transformation Plan initiatives and savings completed and remaining
Details on any restructuring efforts including costs, timing, rationale and P&L impact (historical and projected)
5 year projection model including assumptions and granular back-up
Acquisition pipeline for the Company including strategic rationale, expected purchase price, anticipated P&L, synergies, status, timing
Details on new product initiatives strategy, cost and P&L impact (historical and projected)
Detailed capex schedule including breakout between maintenance, growth and new products and acquisition (5 years historical and projected)
Annual profitability by customer (last 5 years and YTD)
Annual breakdown of sales, volume, and gross margin by product, by region and by customer
Details on end-market exposure (historical and projected)
Adjusted EBITDA and sales bridges (last 3 years)
Detailed working capital schedule

Finance - Facilities

Utilization rates at the manufacturing facilities

Finance - Accounts Receivable

Historical accounts receivable schedule
Top 20 past dues
Details on any recognized bad debt expense

Finance - Inventories

Summary of the composition of inventory for last 5 years
List of products as at the most recent balance sheet date
Detailed inventory valuation report at End of Last calendar year
List of inventory including the result of the last stock physical count, reconciled with the accounting balance at the date of physical count
Details of any inventories maintained off-site

Finance - Banks and financing

List of all banks with which the Company maintains financial and commercial relations
Detailed debt schedule
Promissory notes
Loan agreements
Equipment/other lease agreements

Finance - Fixed Assets

Summary schedule showing the composition of the Company's fixed assets (most recent data)
Schedule showing owned and leased assets
Detailed fixed asset and depreciation schedule as at End of Previous Financial Year and YTD
Summary of depreciation policies and the economic useful lives of fixed assets, by category

Finance - Customers

List of top 25 customers in total, by region and by end product to the extent available
Details on customers including length of relationships, concentrations

Finance - Suppliers

Details on raw materials sourcing
List of suppliers with open balances at the most recent balance sheet date
List of overdue payable amounts as at the most recent balance sheet date
List of top suppliers in total, by region and by end product to the extent available

Finance - Management Reports

For the last 5 years, year-to-date management reports comparing the Company's actual result (in accordance with the management books) with the year's budgeted result
Budgets and operating plans for future periods (particularly detailed plans for year end previous financial year)

Finance - Policies and Internal Controls Matters

Summary of cash management policy, procedures, systems and controls
Details on revenue recognition policies, rebate and sales allowance policies and granting procedures
Details of credit granting, billing, and collection policies and procedures
Description of information systems

Finance - Related Party Transactions

Identify and provide details of all related party balances and repayment terms
Details of inter-company transfer pricing policy

Finance - Competitors

List of significant competitors by end-market and region
Pricing trends/behaviour by key competitors
Market share by competitor
Tracking of new business opportunities

Finance - Sales and marketing

Information on the company's sales strategy and compensation structure associate with each channel
Information on the business development process (i.e., how opportunities are identified, how are bids determined, etc.)
List of major wins and losses over the past 12 months
Description of major marketing expenditures
List of customer complaints and resolutions
Incentive compensation plan(s) for sales team


Material supply and sourcing contracts
Material customer contracts
List of any guarantees
Any other material contracts

Labor Relations - General

Employee agreements for executive management
Employee handbooks
Payrolls, together with general summary (last 5 years and YTD)
Employee headcount by location and function (last 5 years and YTD)
Summary of any collective bargaining agreement/union agreement (last 5 years and YTD)
Summary of any strike/work stoppages/grievances
Consulting agreements
List of all executives that provide services to the Company, informing the corresponding remuneration. (most recent)
Detail surrounding temporary workers that provide services to the Company (e.g. starting and finishing date of providing the services, salary and working area)
List of self-employed people providing services to the Company, containing name, initial date of provision of services, remuneration and description of the services provided (last 5 years and YTD)
List of outsourced companies providing services to the Company, containing name, initial date of provision of services, amount, description of the services provided (last 5 years and YTD)
List of all employees that work via fixed term contracts (most recent)
Workers compensation claims

Labor Relations - Benefits

List of the benefits, both formal and informal, given to employees, directors and officers. (most recent)
Equity-based compensation plans
All compensation agreements covering senior management
Severance benefit plans and other change of control agreements
Pension/OPEB detail including most recent actuarial reports
Profit sharing plan


All applicable tax returns filed for the last five years (federal, state, local, property and foreign)
Details on any deferred tax assets and liabilities
Details on any non-deductible expenses
Reconciliation from marginal to effective tax rate

Environmental Matters

Copies of environmental audits and compliance reports
Phase 1 reports for all facilities
Environmental liabilities and valuation

Regulatory Matters

All permits and licenses
All compliance reports
Any deficiency notices


Summary of all material litigation for the last 5 years
Any settlement agreements from the last 5 years
Documentation of any significant litigation in process or anticipated

Intellectual Property - Trademarks and copyrights

List of all trademarks and copyrights

Intellectual Property - Patents / Industrial Designs

List of all patents and other IP

Intellectual Property - Software / IT

List and describe significant software, hardware and IT systems used to operate the Company and generate financial and management reporting

Intellectual Property - Lawsuit and Litigation

Any material IP litigation

Intellectual Property - New Product Development and Technology

Details on historical and projected R&D
Details on new product initiatives

Real and Personal Property

List of all real estate
Real estate valuation reports
Title reports and property surveys
Vehicle fleet details as applicable
Major fixed assets and equipment
Properties held for sale
Lease agreements


Information on the company's end markets
Information on key industry drivers
Market size/potential
Legislative or regulatory information affecting the industry as a whole
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