JIN Ltd. which is based in Mumbai, is in the business of manufacturing leather products since 1995 and wants to acquire OM Leathers Private Limited,…
CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · May 2025
JIN Ltd. which is based in Mumbai, is in the business of manufacturing leather products since 1995 and wants to acquire OM Leathers Private Limited, which is based in Pune and engaged in the business of selling leather products manufactured by different companies. Before acquisition JIN Ltd. wants to get a due diligence review to be done of OM Leathers. JIN Ltd. appointed S & S Associates for conducting overall due diligence of OM Leathers. During review, the accountant asked OM Leathers to provide financial projections of the company for the next five years, but OM Leathers refused to provide the same and claimed that financial projections are not part of due diligence review. Whether the objection raised by the management of OM Leathers is correct? Give reason.
Suggested Answer and Working Notes:
Correct Answer: Option (B)
The objection raised by OM Leathers is not correct, as due diligence refers to an examination of a potential investment to confirm all material facts of the prospective business which a company wants to acquire and financial projection is a part of same.
Topics: Due Diligence, Investigation & Forensic Audit
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