Independent verification

Confirming a claim against a source that was not produced by, and has no stake in, the transaction - a bank statement, a public register, a counterparty, a regulator.

Example

Adding up a receivables ledger to test whether "over 200 customers" means revenue is actually spread across them.

Important

Asking the seller to confirm the seller's own claim is repetition, not verification. Only a source with no interest in the answer adds anything.

Related terms

• Due diligence — The work of independently verifying the claims made about an investment before committing money to it - the documents, the counterparties, the registrations and the numbers.
• Primary source — A document that originated outside the transaction and was created for some purpose other than persuading you - bank statements, filed returns, signed contracts, public registers.
• Management representation — A statement made by the people selling or running the thing you are examining, whether spoken, written in a deck, or set out in a document they prepared.

Lessons that explain it

• Appraising one item: authenticate before you price, not after — Five checks on one specific opportunity, starting with proof the object is genuinely what it claims to be - because a confident price on a fake or misattributed item is not a discount, it is a total loss waiting for a buyer to notice. (13 min)
• The right expert on one call can change a diligence conclusion — An expert bench is a set of people with deep knowledge in your focus areas - operators, engineers, clinicians, lawyers - who can help check claims quickly. It is built before it is needed and treated with respect. (9 min)
• The customers you find yourself tell you more than the ones you are given — Customer calls are the most direct evidence of demand. They are most useful when they ask about past behaviour and include customers the company did not choose. (10 min)
• A market is the customers you can name, times what they will pay — Commercial diligence tests market claims by building them from countable customers and realistic prices, then checking the parts the company can actually reach. (10 min)
• The real competitor is often a spreadsheet or doing nothing — Competitive diligence maps every alternative a customer could choose, including internal tools and inaction, and uses win and loss data to see where the company actually wins. (10 min)
• A pipeline is worth its probability, not its headline — Sales pipelines are presented at full value. Weighting deals by stage, checking historical conversion and removing stale deals shows how much revenue is realistically coming. (10 min)

All 578 terms in the Investing glossary