Distinguish between the following: 'Legal due diligence' and 'financial due diligence'.

'Legal due diligence' and 'financial due diligence' Both legal and financial due diligence are necessary in any transaction of intra or inter corporate nature. However, they differ mainly in the following: A legal due diligence covers the legal aspect of a business or business transaction while financial due diligence takes care of financial aspects of a business or business transaction. Due the above difference, legal due diligence covers preparation of regulatory checklists, meeting with personnel, independent check with regulatory authorities etc. apart from document verification while financial due diligence covers review of accounting policies, review of internal audit procedures, quality and sustainability of earnings and cash flow, condition and value of assets, potential liabilities, tax implications of deal structures, examination of information systems to establish the reliability of financial information, internal control systems etc.