Financial Due Diligence in a Traditional Framework: What Investors Really Get, How It Differs from Audit, and What to Focus On
Financial Due Diligence (FDD) is a transaction-focused financial review that normalizes and aligns a target’s financials to support valuation and deal structuring. It does not provide an audit opinion or recommend price. Instead, it delivers restated financials, normalized EBITDA bridges, and balance-sheet clarity, highlighting issues that materially affect earnings quality, net assets, working capital, and net debt. This article explains what clients should expect from FDD, how it differs from an audit, what investors should review in an FDD report, common misunderstandings and limitations, typical Hong Kong and PRC accounting surprises, and the key questions investors should ask to extract decision-useful insights.