Big 4 firms (Deloitte, PwC, EY, KPMG) are the gold standard for financial due diligence. They review financials, contracts, and corporate records with institutional rigor.
But they don't physically verify what they're reading is true.
This creates a verification gap, especially on cross-border deals where fraud is harder to detect and easier to hide. This guide shows what traditional desk-based due diligence misses, and why physical verification matters.
| Aspect | Big 4 Due Diligence | Physical Verification |
|---|---|---|
| Location | Conducted from NY/London offices | On-ground in target location |
| Method | Document review, data room analysis | Facility visits, customer interviews |
| Timeline | 90-120 days | 14 days |
| Cost | $150K-$500K+ | $75K-$150K |
| Deliverable | 100+ page report | Clear Buy/Conditional/Walk Away verdict |
| What They Verify | Documents are accurate | Documents are true |
| Area | What Big 4 Reviews | Value Delivered |
|---|---|---|
| Financial Statements | P&L, balance sheet, cash flow analysis | GAAP compliance, accounting quality |
| Legal Structure | Corporate formation, cap table, contracts | Clean title, proper incorporation |
| Tax Compliance | Historical filings, liabilities, exposure | Tax risk assessment |
| Regulatory | Industry licenses, permits, compliance | Regulatory standing |
| Commercial Contracts | Customer/supplier agreements | Contract terms, obligations |
Big 4 firms excel at document-based analysis. If the fraud is in the documents, they'll catch it.
GAP #1: CUSTOMER LEGITIMACY
| What Big 4 Reviews | What They Miss | What Physical Verification Catches |
|---|---|---|
| Customer contracts | Are customers real companies? | Interview top 10 customers directly |
| Accounts receivable aging | Do they actually use the product? | Validate contracts are active and renewing |
| Revenue concentration | Are invoices backed by real transactions? | Confirm payment history matches claims |
Real Example:
Luckin Coffee fraud ($300M+) - Fabricated customer transactions. Documents looked perfect. Customers didn't exist.
Big 4 Verdict: ✅ "Revenue recognition policies are appropriate"