Question

Which of the following best describes due diligence auditing?

A. Determining whether the business justification for a major transaction is valid.
B. Monitoring and evaluating significant construction contracts.
C. Addressing the security of personal information, especially information stored in computerized systems.
D. Reviewing the adequacy and effectiveness of the controls over hazardous waste.

Answer 1

Due diligence auditing is the process of conducting a comprehensive review and investigation of a company or individual's financial and legal aspects before a major transaction.

Step-by-step explanation:

Due Diligence Auditing

Due diligence auditing is the process of conducting a comprehensive review and investigation of a company or individual's financial and legal aspects before a major transaction. It involves examining financial statements, contracts, legal documents, and other relevant information to assess the validity and potential risks associated with the transaction. The main goal is to ensure that the business justification for the transaction is valid and to mitigate any potential financial or legal risks involved.

For example, if a company is considering acquiring another company, due diligence auditing would involve assessing the financial health of the target company, analyzing its contracts and liabilities, evaluating its intellectual property rights, and examining any potential legal issues that could impact the acquisition. This process helps the acquiring company make an informed decision and identify any potential areas of concern before proceeding with the transaction.