What does due diligence mean?

In everyday life, the meaning of due diligence stands for an exercise in risk mitigation, ie there may be many bad outcomes to be avoided through the action taken, including acting unlawfully. In financial setting, due diligence means an investigation or audit of a potential investment consummated by a prospective buyer.

What should I do during due diligence?

During due diligence, you may repeat a number of steps if new information comes to light: Analysis of the purpose of the project (i.e., if the deal still meets business goals) Analysis of offer price (which may be tweaked based on discovery)

How are due diligence standards enforced?

In the United States, due diligence standards and expectations are enforced by common law (laws based on past court decisions versus those written and passed by government) and can also be applied to federal statutes (recognized and enforced on a federal level). Let’s take Section 11 of the Securities Act of 1933 as an example.