During the due diligence review of Alex Ltd for the financial year ended 31st March 2025, the reviewer Mr. Vardhman assessed the business…

CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · May 2026
During the due diligence review of Alex Ltd for the financial year ended 31st March 2025, the reviewer Mr. Vardhman assessed the business feasibility to evaluate whether the current business would be more beneficial in future or not. The management of Alex Ltd., however, did not understand this perspective and contended that the reviewer has no powers to assess the business feasibility, as the company had been consistently profitable for many years. In the above context, which of the following statement should be correct?
(A) The contention of the management was correct.
(B) Reviewer was correct, as due diligence covers assessment of business feasibility as well.
(C) Reviewer was correct as due diligence covers assessment of business feasibility as well, however, as the company was doing this business for decades it should not have been carried out by the reviewer.
(D) Management was correct; however, it should have discussed the same with the investor as part of the sale contract.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

Reviewer was correct, as due diligence covers assessment of business feasibility as well.

Topics: Due Diligence, Investigation & Forensic Audit

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