"Audit is a financial post-mortem analysis whereas due diligence is a future decision and a process to achieve the desired comfort level about the potential investment." Comment.

An audit is concerned with historical financial statements only and provides an opinion as to whether the financial statements represent a "true and fair" view of the company's operations. Due diligence, on the other hand, review not only look the historical financial performance of a business but also consider the forecast financial performance for the company under the current business plan. The following table describes the difference between Due Diligence and Audit. Particulars Audit Due diligence Scope Limited to financial analysis Includes not only analysis of financial statements, but also business plan, sustainability of business, future aspects, corporate and management structure, legal issues etc. Data Based on historical data Covers future growth prospects in addition to historical data. Mandatory Mandatory Mandatory based on the transaction. Assurance Positive assurance i.e. true and fairness of the financial statements Negative assurance. i.e. identification of risks if any. Type Post mortem analysis It is required for future decision. Nature Always uniform Varies according to the nature of transaction Repetitiveness Recurring event Occasional event