Financial due diligence is a process through which an investigation and, subsequent research, is carried out by financial professionals, regarding  the financial matters and circumstances of a certain target firm, and an analysis of various other factors related to it. A due diligence investigation is done keeping in mind the principles and objectives of the acquiring firm. The firm that implements a due diligence action takes a lot of measures with respect to the same, such as conduction of interviews and discussions with senior and important employees, document reviews, comparison of various previous financial data, trend-analysis as well as reporting of financial challenges and tax risks. The service of financial due diligence also offers to study the conditions of the actual current operations for the target firm, so that such information can be conveyed to the corresponding responsible firm.

The main aim of due diligence is to provide an assurance engagement report. There must be a thorough understanding of the latest standards associated with accounting and auditing in the professional, usually an accountant, responsible for reporting the due diligence. Though they are not supposed to comment on the truthfulness of the financial statements. However, they are supposed to apply the regulations associated with financial due diligence, laid down by the International Standards on Auditing (ISA). Financial due diligence mainly focuses on the understanding and establishing of the true and real financial condition of the target firm for the past few years. It can, however, also help in understanding and predicting the future financial conditions that may be faced by the firm.

Within the process of due diligence, it is vital to also clearly understand the internal control regulations and operations management of a company, and how it has landed the company in the current financial condition it is in, whether good or bad. Due diligence services are of extreme importance, when it comes to any merger or acquisition (M&A) situation. The process provides an elaborate insight into the inner workings and operations of the target firm to the buyer, or acquiring firm. Through an analysis of a due diligence report, an investor is able to decide whether to acquire the business or invest in it. Further, the investor can choose to re-negotiate any prices that may have been decided prior to the diligence report. The new prices can be based on the findings of the due diligence and their impact on the target firm's future profitability. In short, such reports allow investors to make informed decisions and be aware of the possible risks in associating themselves with the target firm. It is extremely important for investors to know what they're getting into, because no one would like to invest into a business and have it turn into a liability rather than an asset. Therefore, due diligence experts and auditing professionals help to make sure that a company sticks to correct and legal book-keeping formats, the necessary accounting standards and proper financial reporting. They can also help advise and predict to the investor if there are any alarming aspects or red flags related to the target firm or its records.

Financial due diligence service providers can offer thorough and accurate solutions to companies, while maintaining a very high level of precision as well as privacy while analysing the required financial records. Moreover, while offering due diligence expertise, they are also qualified to offer many other things into consideration, such as the industry in which the target operates, risk areas specific to the firm, tax risks and statutory risks, legal and compliance risks, etc. The most important and basic objective of a due diligence report is to provide the buying or investing entity with updated, complete and to-the-point information about the target firm and its operations, which would thus facilitate the buyer to know all the risks that he is entering into and hence make a fair offer.