What is the difference between Audit and Due Diligence?

Due Diligence is the intense examination of a target business for a merger or acquisition by a prospective buyer and it can be described as fact-finding to assist in determining whether to buy the business at all, how much to pay for the business and how to structure the acquisition. The principal purpose of Due Diligence is to verify assertions made by the Seller and to identify caveats that may not have been disclosed to the Buyer. It is a reasonable investigation about the state of affairs of the business to be acquired, focusing on matters which may have an effect on the future of the business. More specifically, a due diligence audit is performed to help a buyer understand details of the development process, degree of regulatory compliance, etc. of a target company. The level of assurance required from due diligence will determine what level of audit needs to be conducted.