Origination of due diligence and scope of its application

Abstract

Companies that develop in international public space, with traditional financial analysis, where various financial coefficients from the balance sheet, profit and loss account and cash flow statement are analysed, remain less and less. In order to assess a financial condition and results of economic activities and its development trends, it is necessary to use different methods of analysis. By using the methods of analysis of due diligence, a wide range of sources of information is used and from the result of the analysis one can obtain both qualitative and quantitative indicators, which are the basis for creditors and potential investors in decision-making.

The aim of the article is to explore the theoretical aspects of due diligence and develop proposals for its use in business environment. The article explores the essence of due diligence and origination of its history, forms of due diligence and major components that are significant for each group of users of analysis. The author examines in detail the procedures of due diligence and reveals the differences from audit procedures. The article is prepared on the basis of foreign scientific and economic literature, publications of scientists and materials of international conferences.