Diligence questions look like requests for documents and are really tests of three things: whether the earnings are real, whether they continue without you, and whether anything is hiding. Reading them that way makes the answers obvious and stops sellers treating the process as an audit to be endured.
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Questions about the earnings
Why did margin move in that year. What are these add backs and what evidence sits behind them. Show revenue by customer for three years. Explain the gap between the tax return and the management accounts. Each is testing whether the number in the information document survives contact with the source data, and each is answerable in advance.
Questions about continuity
Who wins the work. Who do the top customers call. What happens to the business if the owner stops turning up. Which employees are critical and what are they on. Buyers will ask this in several ways because it is the question that decides the multiple, and a vague answer is read as a bad one.
Questions looking for something, which the due diligence memo will record
Any litigation, threatened or actual. Any regulatory contact. Any customer who left in the last two years and why. Any related party transactions. A buyer asks these expecting a straight answer, and the memo their adviser writes will note whether they got one.
Questions people ask about due diligence questions
How fast should I answer during the due diligence review?
Same day where you can. Speed is read as competence and slowness is read as concealment, whatever the truth is.
What is a red flag report?
A short early report from the buyer's advisers listing the issues that could stop the deal or change the price, produced before the full report so the buyer can decide whether to continue.
Can I refuse a question?
You can defer sensitive items to a later stage, and you should. Refusing outright without a reason is the strongest negative signal available to you.