Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a transaction with another party.Due diligence is evaluating a prospective business decision by making sure that all the facts regarding the firm are available and verified.Accountants use due diligence to investigate and review a company's various financial or business processes.

Small businesses may also go through a due diligence process with banks, lenders or investors during the finance process. Banks,lenders and investors use due diligence to assess the financial growth potential of small businesses prior to lending money. Due diligence is most often used when buying a business as the buyer go through the financial situation of the business, customer records, legal obligation and other records. to ensure that all the facts about a firm are accessible and have been independently verified.

It is most often very similar to an audit. During the process of due diligence,all the documents of a firm are assembled and reviewed.It's a way of preventing unnecessary harm to either party involved in a transaction.