Due Diligence Procedures on the UFE

As I discussed before, the 2010 UFE Report mentioned that due diligence was a weakness and I suggested this year’s UFE writers may want to brush up on the topic. One of our readers sent in a few questions around this topic so I did a little digging and I’ll discuss how I understand it today.

Reporting on the results of due diligence procedures is not itself a report and therefore in a UFE simulation, it is important to provide valid procedures which are linked to case facts. You should also state why each procedure is important/useful so that the client understands what you are trying to accomplish and why it’s important. Remember what your role is and for whom you are creating the report.

Providing due diligence procedures is not the same as providing a comfort letter which is covered under Section 7200 in the Canadian Auditing Standards. Section 7200 states that when there is an offering document, an auditor may be asked to provide a letter which expresses an opinion as to the compliance of the financial statements with legal requirements. It’s important that the auditor not offer assurance over the entire offering document but only certain financial info/statements referred to in the document. As a side note, I’ll add here that “Auditor involvement with offering documents of public and private entities, including current legislative and regulatory requirements and auditor assistance to underwriters and others (AuG-30)” is a Level C topic on the UFE therefore only a basic understanding is required. (See. p. 68 of the 2010 UFE Candidates’ Competency Map)

A significant difference between a comfort letter and due diligence procedures is that a comfort letter may provide some level of assurance while with due diligence procedures you are only reporting on the results of these procedures without offering positive or negative assurance.

There is a CA Magazine article (caution: from 2000 so a little out of date) about comfort letter which you can read here.

Enjoy your weekend! Remember it’s vital to take time off and refresh in order to stay at your best.


If anyone has more to add on this topic please share in the comments below!

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