Page 330 - CA Final PARAM Digital Book.

➢ Statutory Compliance: This is one area that has to be examined in detail. It is important to make a
list of laws that are applicable to the entity as well as to make a checklist of compliance required
from the company under those laws. If the company has not been regular in its legal compliance, it
could lead to punitive charges under the law. The impact on such violations be quantified and
assessed in respect of entity; financial status and even on its governing concern status.

➢ Human Resources: In the Indian context, the status of work force, staff and employees is a complex
problem. It is important to work out how much of the labour force has to be retained. It is also
important to judge the job profile of the administrative and managerial staff to gauge which of
these matches the requirements of the new incumbents. The aspects whether all employee
benefits like PF, Gratuity, ESI and superannuation have been properly paid/funded. The pay
packages of the key employees will be thoroughly reviewed since this can be a crucial factor in
future employee costs.

Author’s Note
• If the question asks about due diligence but it is silent on which type of due diligence, then we
have to assume and write answer considering financial due diligence.
rd
• Question may also ask about any specific requirement such as the 3 question which specifically
asks for “What points will you check in order to ensure that company will be able to meet the
th
cash requirements internally?”, in such case such write the 5 para of the answer that deals with
cash flow.
• If question is on due diligence on proprietary business then give answer for financial due
diligence i.e QNO 623.000 and if it is on investigation of proprietary business answer as per QNO
643.050.

DD (Under / Over Valuation) Old Course-(N05E, N10E, M12E, N13E, M15R, PM17, M17R, N17M, M18E,
QNO TITANIUM CNO – DD.100 N19R, N20R, N20E, SM21, N21M, N22M)
627.000
New Course-- (SM23)
M Limited is going to acquire S Limited The purchase consideration has been decided at Rs 4000 Crores M
Limited is worried about hidden liabilities or overvalued assets of S Limited and approached you to
examine the same List out eight important transactions/items which you would like to investigate in the
Due Diligence exercise.
OR
Zeta Ltd is anticipating taking over a manufacturing concern and appoints you for due diligence review
While reviewing, it requests you to look specifically for any hidden liabilities and overvalued assets State
in brief the major areas you would examine for hidden liabilities and overvalued assets.
OR
Vita Ltd. is anticipating taking over a manufacturing concern and appoints you for due diligence review.
While reviewing, it requests you to look specifically for any hidden liabilities. State in brief the major
areas you would examine for hidden liabilities.
OR
K.DK Bank Ltd., received an application from a pharmaceutical company for takeover of their outstanding
term loans secured on its assets, availed from and outstanding with a nationalized bank. KDK Bank Ltd.,
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