The diligence report is written by the buyer's advisers for the buyer, and a seller normally never reads it. Knowing its shape matters anyway, because its findings arrive as price adjustments and as changes to the warranty package, and a seller who understands where they came from can argue with them.
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Due diligence report format: what is in one
An executive summary with the findings that matter, a section per stream (financial, commercial, legal, tax, IT, HR), a schedule of adjustments to reported earnings with the reasoning for each, a list of risks graded by severity, and recommendations, which usually means what to reflect in price, what to cover with an indemnity and what to fix before closing.
How findings become money
An adjustment to earnings changes the price directly because the price is a multiple of those earnings. A risk that cannot be quantified becomes a specific indemnity, an increased escrow or a condition. A seller who has evidence for a disputed adjustment should produce it immediately: once a finding is in the report it has an institutional life of its own.
The seller's version
In competitive processes sellers sometimes commission their own report before marketing, usually a quality of earnings exercise. It costs money and it finds your problems while you can still fix them, and it gives buyers a starting point they have to argue against rather than a blank page to write on.
Questions people ask about due diligence report
Will I see the buyer's report?
Usually not. You will see its consequences: adjustments proposed, indemnities requested and conditions attached.
Can I challenge a finding?
Yes, with evidence and quickly. Advisers write what the data showed them, and a document that was never provided is the most common reason a finding is wrong.
Is a vendor report worth it?
On a larger sale with several bidders, often. On a small sale the cost rarely returns, and a well prepared file does most of the same work.
What does a due diligence report sample show that a due diligence report template does not?
A specimen shows the reasoning: the schedule of adjustments with a stated basis for each, and the risks graded by severity. A template gives you the section headings and none of that, and on this document the reasoning is the part that moves the price.
What is a red flag report due diligence teams produce?
A short early output naming only the findings that could stop or reprice the deal, ahead of the full report. It is common where a buyer wants to decide quickly whether to continue, and for a seller it is the moment a known problem surfaces.