Due Diligence

In the realm of finance, due diligence refers to the meticulous examination of financial records that takes place prior to engaging in a proposed transaction with another party. It encompasses a comprehensive investigation, audit, or review conducted to validate the facts surrounding a matter under consideration. The term originated in the United States with the Securities Act of 1933, which held securities dealers and brokers accountable for fully disclosing material information about the securities they were selling, under the risk of facing criminal prosecution. Today, it has become a standard procedure in various business transactions and arrangements.