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CA Final · Advanced Auditing, Assurance and Professional Ethics · Due Diligence, Investigation & Forensic Accounting

Zenith Retail Ltd's board asks CA Prakash for a report on the possible acquisition of a competitor, with a focus on the target's commercial prospects, key customers and operating risks, but not an examination of financial statements. Which type of due diligence is this?

This is commercial due diligence, because it focuses on the target's market position, customers, competition and operating risks rather than on its financial statements or tax exposures. Financial and tax due diligence examine numbers and liabilities, and a statutory audit gives an opinion on the accounts.

  1. ACommercial due diligenceCorrect
  2. BFinancial due diligence
  3. CTax due diligence
  4. DStatutory compliance audit under the Companies Act

Explanation

Commercial due diligence assesses the target's market position, customers, competition and business prospects. Financial due diligence examines the quality of earnings, assets and liabilities. Tax due diligence focuses on tax exposures. A statutory audit is a different engagement meant to give an opinion on financial statements.

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