Due diligence can be used to denote either a process (systematic research) or a legal requirement (“duty of due diligence”).
As a process, due diligence is used to mean the systematic research and verification of the accuracy of a statement. The term originated in the business context in relation to the validation of financial statements: the goal of conducting due diligence was to ensure that all stakeholders have the information they require to assess financial (and other) risk.
Due diligence may, in other situations, indicate a legal requirement. In certain contexts, professionals may be subject to a “duty of due diligence,” whereby they are required by statute or other authority to act in a manner that demonstrates a degree of prudence. In the workplace health and safety context, for example, a duty of due diligence will often place a requirement on supervisors to have taken reasonable steps to avoid dangerous or risky situations.
Other contexts give rise to a “defence of due diligence.” In Canadian law, for example, there exists a class of offences (of both the criminal and regulatory variety) which are subject to such a defence. An individual accused of such an offence may be found not guilty if she exercised due diligence – that is if she took all of the precautions reasonable in the circumstances to avoid the offence from occurring. These are called “strict liability” offences.
Drawn in part from TechTarget, Due Diligence, at http://whatis.techtarget.com/definition/due-diligence, accessed 25 January 2016.
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Page created by: Dave Marshall, last modified by Ian Clark on 31 May 2016.
Image: From Levy LeGette LLC at http://www.levylegette.com/wp-content/uploads/2011/03/it-due-4.jpg, accessed 25 January 2016.