The risks and opportunities presented by artificial intelligence (AI) and big data in financial due diligence (FDD) are among the subjects tackled in a new ICAEW best practice guideline published to reflect a sea change across the dealmaking sector in the way that FDD is commissioned and carried out.

The guideline, produced by ICAEW’s Corporate Finance Faculty and written by corporate finance experts at PwC, highlights how the use of AI and data analytics combined, critically, with human oversight enables a significantly greater level of insight and better-informed forecasting than had previously been possible.

But although the use of technology has revolutionised the FDD process, it also brings with it certain important risks and issues that members and firms working in the deal space need to manage very carefully. 

Greater investor scrutiny

Deals are taking longer to complete, in part due to investors seeking deeper scrutiny and greater data analysis about deals; last year alone, the number of documents in data rooms increased by 32%, according to DataSite. At the same time, the way that information is shared is changing, with the growing expectation of access to dynamic data and visual dashboards throughout the process.

David Petrie, ICAEW Head of Corporate Finance, says investment in AI for FDD has reached an inflection point among the largest firms, with the mid-market rapidly following suit. “The capabilities that it brings are revolutionary, in terms of the level of insight that can be provided by managing much larger data sets. But human insight and traditional factors such as professional judgement and the ability to see the wider picture are always going to be important.”

Changing client expectations

“The practice of financial due diligence has changed dramatically over the years. Now there is real-life exchange of data and data sets between member firms and their clients, and the expectations of clients have changed significantly. It brings with it a whole series of different risks, but also opportunities that all parties need to manage,” Petrie adds. 

This best practice guideline outlines what is realistic when it comes to client expectations within the bounds of their engagement and what FDD providers cannot give an opinion on. The guideline, which was reviewed by the Corporate Finance Faculty’s technical committee, includes details of all aspects of the process, including setting the scope of the FDD, bringing together the right team, reporting formats and regulatory considerations.

Evolution of FDD brings into sharp perspective the need to continuously update professional qualifications to include the skills needed to form insights based on the output from these new technologies. The foundational skills that the ACA brings are vital to performing effective FDD. Just last week, ICAEW unveiled significant changes to its ACA qualification from September 2025, including a streamlined structure, new resources for developing digital skills and the ability for students to complete specialised learning as part of the new ACA.

Professional scepticism

“What accountants bring, thanks to their training, is professional scepticism and a broader appreciation of business on matters such as tax and financial reporting, as well as an understanding of the interrelationship between commercial factors and how these are reflected in the numbers. But, having said that, they also have to become familiar with the new technology – and fast,” Petrie adds.

Katerina Joannou, Senior Manager, Capital Markets Policy in ICAEW’s Corporate Finance Faculty, says: “We’re not close to AI replacing what teams bring to these projects; that human oversight is going to be needed in the same way that it’s needed with other use cases of AI. 

“At the same time, when it comes to setting the expectations of those commissioning FDD work, this isn’t an audit opinion. It’s a deep and objective inquiry into information and brings findings together with what you know about the business. Just because it’s not an audit doesn’t mean it’s less useful – it’s a different exercise, carried out for a different purpose.”

Dynamic and ever-changing business

Lucy Stapleton, Global Head of Deals at PwC, who was at Chartered Accountants’ Hall for the launch, says: “It was a real pleasure to launch the ‘Financial Due Diligence in the Age of AI and Big Data’ report in conjunction with ICAEW Corporate Finance Faculty. The FDD process is evolving hugely due to market conditions and exciting technological advances that continue to shape our industry. It is truly an exhilarating time to be part of this dynamic and ever-changing business.”

Mark Binney, Transaction Services Partner at PwC, who authored the guideline, says there are many parties involved in M&A transactions that would find this FDD guideline helpful: “They include any seller or buyer of a business looking to commission FDD providers; lead advisers on deals; lawyers involved in drafting sales and purchase agreements; warranty and indemnity insurers and other specialist due diligence providers, who often feed their findings into the FDD report.”

• Download ICAEW’s Financial Due Diligence guideline