What is a due diligence report?

A due diligence report is a report prepared as a preliminary step for a client intending to enter into a specified transaction. The report is generally prepared by experts in a particular field, for instance accountants, geologists and lawyers. The purpose of a due diligence report is to assist a client mitigate risk. Put differently, due diligence can be described as financial and legal risk management. The considerations for due diligence differ between one client and the other. For instance, it is not uncommon in Zimbabwe for a client to conduct a credit vetting on persons of interest and to obtain information on whether potential debtors or creditors are not defaulters from entities such as the Fincheck (Pvt) Ltd (formerly Dunn & Bradstreet) or Financial Clearing Bureau on whether there are financial judgments against potential debtors. However, a due diligence report is not limited to credit vetting of persons of interest. Individuals and corporates may require due diligence reports in order to know the status of debtors, employees, tenants and suppliers. Thus, a due diligence report may be basic or comprehensive.