Accounting Philosophically: "Due Diligence or Diligence Due?"

As you've probably noticed by now, my friend and I tend to get into some fairly philosophical discussions (bourbon has this affect on us) - and recently, we were talking about the mergers and acquisitions that seem to be going on, almost on a daily basis, in the business world.

In particular, we focused on the GM-Fiat merger and wondered about its impact, especially since Italy is part of the European Union, on the Euro and the Dollar - and globalization. But, that's a topic for another article that I'll have to think about some more.

Anyway, moving on, we considered the due diligence that should be a key part of any merger or acquisition and, as we do in most discussions, we tried to apply it to the current "real world" economic situation we are all in.

For those that may not be that familiar with the term, due diligence is basically the investigation, analysis, and evaluation of all pertinent financial and business data and information of all companies or organizations involved in the merger or acquisition. This naturally led us to wonder about how a government in deficit could be a viable partner in a merger or acquisition. But again, that's a topic for another article that I'll have to think about some more.

So, we moved on to the mortgage crisis - now, foreclosure crisis - and we wondered about what due diligence must have been done by buyers, sellers, and the organizations that financed the transactions. For most of us "average Joe" folks, the purchase of a home is the biggest transaction we will ever attempt. So, what happened?

Like always, my friend offered this philosophical observation, "My guess is that due diligence was interpreted to mean "I will be diligent when things come due - until then, hey, I've got a beautiful place to live in." If this observation is even a little bit accurate, and assuming it also applies to the sellers and finance organizations, then we really have to wonder exactly what kind of accounting and bookkeeping was going on. Surely, they did not all graduate from the Avaricious University School for the Financially Unaware!... whoa... let me get off my soapbox here...

My main point here is due diligence - and although it is generally thought of in a more strategic sense, it really needs to be applied our everyday accounting and bookkeeping practices. If this is done, then perhaps we will never need to worry about merger, acquisition - or foreclosure.

Interesting, huh? Let me know what your thoughts: Email me at william.vasquez@taxtalkonline.com

Accounting Philosophically is strictly a tongue-in-cheek observation and is not intended to reflect any political affiliation, lobbying cause, or other similar position