I may be a bit naive here, but I was wondering that with the level of information that the annual reports of big corporations contain and the assurances existing and all the disclosures from BoDs and the CEOs and the audit and compensation commitees etc , would all the information needed be enough to have it all?
Shouldn’t the same apply also for all entities audited from big 4 or 5?
Combined with ethics standards discussed in another topic and all representations and warranties and indemnities of the agreements, would the DD process be of a marginal importance?
I had the same thought in the past. My view is that the due diligence is used to verify the good standpoint of the company and most importantly raise any red flags, related to the deal itself. Those red flags might be issues that are not presented within the annual reports and issues that might as well differ according to the scope of the acquisition. For big corporations there is a point on your comment but history has shown that unfortunately not all annual reports correctly audited, so from a safe side a DD should be sufficient to justify the reports and public data as well.
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