The Benefits of Due Diligence Auditing for UAE Companies
Due to the increased risk of corruption internationally, it’s important to conduct due diligence checks on a global scale.
As a result of due diligence, UAE companies can:
- gain insight into customers, employees and vendors
- minimise the exposure to reputational, financial and regulatory risks
- increase productivity and profitability
- improve decision-making
Due Diligence Audit Process
Although the due diligence process will vary from industry to industry, in the event of a potential sale, acquisition or new trading partner, documentation and information will be requested for verification and assessment.
Typical due diligence checks include:
- Legal due diligence
This assesses the potential legal risks of a business transaction and involves the review of any contracts, loans, securities, intellectual property, and pending litigation involved in the transaction. It also includes an analysis and assessment of the potential exposure of the company to corruption, legal and regulatory risk.
- Operational due diligence
This considers the operations of the company in order to assess the risks and benefits. It will also assess the viability of any business plans and any associated risks involved, taking into consideration the positioning of the company within the market place.
- Financial due diligence
In this the financial information and trading performance is assessed. This includes an assessment of earnings, assets, liabilities, cash flow, debt and management, both historically and based on future forecasts.
- Market due diligence
This involves an evaluation of the current and future potential of the company/trading partner by means of third party information.
- IT due diligence
This considers whether the IT systems are efficient, cost-effective and secure enough to support an organisation’s growth.
- Intellectual due diligence
This focuses on the intellectual capital of a company and includes the advantage a company has over its competitors.
- Human due diligence
This considers the value of a company’s employees in terms of skills, education, experience, creativity, and other social attributes such as willingness to co-operate.
Outsourcing Due Diligence
Given the complex nature of international trading, outsourcing due diligence can be an attractive option for UK companies, especially as they may not have the necessary expertise and resources to conduct it themselves or in-house.
The benefit of outsourcing due diligence is that it can offer access to enhanced global due diligence checks and global compliance monitoring services. It allows individuals and companies to be screened without diverting resources from other areas of the business.
Due diligence audit in Dubai is the first thing for investors in Dubai to do before having a deep dive into a potential merger or acquisition of a target business.
Who Performs Due Diligence Assessments?
Most investors have a competent attorney and CA to perform their legal and financial due diligence. These are assessments of the current legal and financial status of the target and have the principles of law and accounting to guide them. During the legal assessment, a buyer’s attorney will collect all of the outstanding contracts and agreements as well as any outstanding, pending or potential litigation along with all documents that constrain the business. For the financial assessment, the buyer’s accountant will look at the income statement, cash flows and other financial reports in order to verify its past performance. The accountants will look at the financial data for the last 3 to 5 years, depending how diligent the investor is. They’ll commonly ask for independent third-party audits of the target’s financial reports.
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