Explanation Of What Is Due Diligence? “Direct audit of a bank that gives the right to examiners to request confirmation from bank management regarding the correctness of financial reports. About bank audits in Indonesia, this term is defined as a financial audit of banks in the context of implementing a bank recapitalization program.”

What is Due Diligence?

Due diligence is an investigative activity or financial history audit carried out by a potential investor in a company where he intends to invest. In Indonesia, this term is also known as “due diligence”. This due diligence is important so that investors do not take the wrong step when deciding to buy shares of the intended company from securities as intermediaries (brokers).

Conversely, the term due diligence also refers to the activities of the seller in analyzing whether the prospective buyer has sufficient funds to make a purchase transaction.

How Does the Due Diligence Process Work?

Negotiators and securities brokers play an important role in the smooth running of this due diligence process. No kidding, negotiators, and brokers are required to be able to provide clear and candid information to potential investors. The slightest misinformation conveyed by these two elements then has entered into a criminal act and will be processed legally.

This rule mainly applies in the United States, through the securities law of 1933. However, the rule also tries not to necessarily prosecute negotiators and brokers who are ‘problem’. There needs to be an in-depth investigation before finally deciding whether there is an indication of a crime or not.

Broadly speaking, the parties involved in due diligence include:

• Equity analyst
• Funds manager
• Broker-dealer
• Investors

Specifically for investors, carrying out due diligence activities is not mandatory, but it should be done so that investment decisions are right on target so that the risk of loss can be minimized.

After that, then carried out the stages of the audit consist of:

• Analysis of company capitalization aims to see how much potential profit can be obtained by investing in the company in question.
• Analysis of income, profit, and margin, aims to see the company’s income from time to time, as well as the margin between the capital and the value of the profit earned.
• Competitor analysis aims to see a map of competition between the company you want to target and other companies that are its competitors.
• Evaluation, after the analysis is carried out, the relevant parties will evaluate before finally deciding whether the potential investor can invest in the intended company.

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