A financial due diligence is an investigative analysis into the operations of a business in order to identify risks and ensure that the purchaser is aware of significant risks and liabilities associated with the target. A financial due diligence is most recommended with the proposal of a merger or acquisition, and the target needs to be vetted. It can, however, also be beneficial for a company to identify any conceivable exposures.

By conducting an in-depth analysis, all risks and opportunities can be identified. This helps to recognise any historical financial risk exposures and prevent the reoccurrence of such exposures.