Answers / Financial Due Diligence
How does FDD differ from an audit?
A core Financial Due Diligence interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Purpose: audit verifies GAAP/IFRS compliance; FDD assesses economic performance. Scope: audit covers full year; FDD focuses on trailing 12–36 months. Output: audit gives an opinion; FDD gives a report with findings (no opinion). Client: audit serves shareholders; FDD serves the buyer or seller in an M&A transaction. Standard: audit follows ISA; FDD follows market practice.
WHAT INTERVIEWERS LISTEN FOR
- ✓Purpose: audit vs FDD
- ✓Scope: full year vs trailing months
- ✓Output: opinion vs report
- ✓Client: shareholders vs M&A parties
- ✓Standard: ISA vs market practice
COMMON MISTAKES
- ✗Confusing FDD with audit opinion
- ✗Thinking FDD covers full fiscal year
- ✗Believing FDD serves shareholders
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