This tax liability reduction practise, either through legitimate or illegitimate options, is known as “Tax Avoidance”, “Tax Evasion” and “Tax Planning. Although the words “Tax avoidance” and “Tax evasion” and “Tax planning” sound similar but in practical scenarios they are radically different.
FAQs on Due & Diligence Audit
While the audit is an independent examination of financial statements and it is carried out for the benefit of all stakeholders of the company. However, due diligence is the examination of the entire business for a potential investment and it is carried out for specific stakeholder to assure the consensus between the facts presented and one that is actual.
A review, audit or investigation conducted to identify correctness, completeness and and assurance of the facts presented about the matter in consideration is called due diligence.
Due diligence can be voluntary as well as legally binding. Some examples are evaluating the assets of the company to be acquired, carrying out Tax due diligence to identify possible legal liability that may come up in future, or operational due diligence when there is a change in team or function or department, etc, financial due diligence is carried out before sanctioning any loan or credit facility to identify credit worthiness of the business.
Due diligence can be conducted by any individual or a firm who is an expert in the field. However, these days Chartered Accountants are preferred as they are efficient and carry a thorough knowledge about all the streams, and laws and regulations
Conduction of a prudent review by an expert is due diligence. It is required so as to assess the opportunities, threats, potential risks in a deal to be conducted before entering any contract or agreement
- Analyze the financial situation
- Inspect financial statements and accounting procedures
- Human resources and practices
- Legal aspects
- Size of both the parties
- Management and leadership
- The business