Discover the key differences between auditing and investigation and how they play distinct roles in ensuring financial transparency and integrity. Understanding these differences is crucial for businesses and individuals alike, as they play a vital role in ensuring transparency, accuracy, and accountability in financial matters.

Difference between Auditing and Investigation

Audit is conducted on behalf of shareholders in the case of company and proprietors in case of private concern.

Investigation may be conducted on behalf of shareholders or proprietors but generally it is conducted on behalf of outsiders who want to purchase or lend the money etc.

2. COMPULSORY

• Audit of accounts of joint stock company is compulsory by law.

• Investigation is not compulsory.

3. TIME

• The audit of accounts usually covers year or six months.
• Investigation may cover a period extent over 3 to 7 years.

4. CHECKING METHOD

• Audit is a kind of test checking
• Investigation is a through examination of books of accounts for a particular years or a number of year.

5. NATURE OF OBJECT

• The nature of the audit is to find that whether the balance sheet exhibits a tine and correct view of the state of companies affairs.
• Investigation is conducted for many objects e g. to ascertain, profit earning Capacity of a business, to prove fraud, to advice the parties to buy a concern or not, or to invest the capital or not etc

6,         DUPLICATION

• Audited accounts are not audited again.
• Investigation may be conducted even though the accounts have been audited.

7. NATURE OF REPORT

• Audit reports have certain defects
• Investigation reports are positive and have no defects.

8. SUBMISSION OF REPORT

• The report of audit is submitted to the shareholders or proprietors
• Report of investigation is submitted to the party appointed him for investigation

9. CONCERN WITH FINANCIAL POLICY

• Auditor has to state the facts about the policy of the company whether it was followed or not..
• Investigation has no concern with the financial policy of the company whether it is followed or nor.

10. SEQUENCE OF WORK

• The work of audit is done before investigation.
• Work of investigation is done after audit.

In case of investigation, the net profit is calculated

12. PRINCIPLES

• It is necessary for auditor to follow the accounting principles and policies.
• It is not necessary for investigator to follow the accounting principles and policies.

13. EMPLOYEES

• ^The auditor does not examine the employees personally. *
• The investigator may examine the employees personally.

14. QUALIFICATION

• The qualification of auditor must be C.A
• the qualification of investigator may not be C.A.

15. DEPEND

• The auditor depends upon accounts for checking the business performance.
• The investigator depends upon audited accounts for his work.

16. RECOMMENDATION

• The auditor can not recommend any course of action to overcome the weaknesses
• The investigator can recommend the course of action to overcome the weaknesses.

17. CHANGES

(a) The auditor can not make any changes in books of accounts

_# (b) The investigator can make necessary changes in the books of accounts *

18. IN DETAIL

• The audit report is not in detail.
• The investigation report is in detail. It can show the documents examined, methods applied and whole wor done.

19. DISCLOSURE

• There is particular legal requirement of disclosure of information derived from audit
• There is no legal requirement of disclosure of information derived from investigation.

20. REGULAR

• The audit work is regular feature of typical type of business.

Investigation is not a regular feature of the business

Key Differences

While auditing and investigation both involve examining financial information, there are key differences that distinguish them from each other:

• Purpose: Auditing is aimed at providing assurance on the accuracy and reliability of financial statements, while investigation focuses on uncovering fraud, misconduct, or irregularities.
• Scope: Auditing covers the entire financial operations of an organization, while investigation is more focused on specific issues or incidents.
• Approach: Auditing follows a systematic and predefined approach based on established standards and procedures, whereas investigation requires a more flexible and customized approach tailored to the specific circumstances of the case.

In conclusion, auditing and investigation are essential tools in maintaining financial integrity and transparency. While auditing ensures the accuracy and reliability of financial information, investigation helps uncover and address instances of fraud and misconduct. By understanding the differences between the two, businesses and individuals can better protect their financial interests and uphold ethical standards in their financial practices.