Due diligence - acceptance considerations

In this lesson

1. 0:00 Acceptance considerations for due diligence
2. 0:12 Hostile takeovers and evidence access challenges
3. 0:33 Understanding acquisition scope and engagement type
4. 1:02 Meeting deadlines with sufficient resources
5. 1:19 Ethical threats and auditor independence issues
6. 2:10 Management's role in acquisition decision-making

About this lesson

Due diligence assignments present unique challenges—from hostile takeovers that limit access to records, to ethical threats like self-review risk if you're also the target's auditor. Understanding these acceptance factors is essential for papers covering audit and assurance work, particularly when advising on M&A activity. The video walks you through the key acceptance considerations you must evaluate. First, assess the nature of the acquisition itself—hostile takeovers create practical barriers to obtaining sufficient evidence and accessing management and records. Second, clarify the scope: is this an assurance engagement or agreed upon procedures? This determines your resource needs and the depth of work required. Third, confirm you can meet the deadline without compromising the quality of your work. The ethical dimension is equally important. If you're also the target company's auditor, accepting a due diligence role creates potential threats to your objectivity—particularly self-review risk if your valuations or calculations later appear in audited financial statements, or management threat if you're influencing acquisition decisions. You must also consider the integrity of the client: if they're not using their existing auditor for due diligence, understand why. These acceptance considerations ensure you protect your professional standing while delivering meaningful assurance to the acquirer.

Duration: 2m