Difference between Auditing and Investigation

Difference between Auditing and Investigation

Difference between Auditing and Investigation


Auditing is the checking of the transactions of the business with its books of accounts and evidences with a view to find out the arithmetical accuracy of the accounts, the correctness and truthfulness of the transactions recorded in the books and of their results thereon.


ACCORING TO SPICER AND PEGLER “The term investigation implies an examination of accounts and records for some special purpose. It differs from an audit as much as it is not primarily carried out for the purpose of ascertaining whether a balance sheet is properly drawn up or for the purpose of obtaining information of a particular nature required by a client.”

The main points of difference between Auditing and Investigation are given below:

Nature of difference Auditing Investigation
1.       Object Audit of accounts is to ascertain whether the balance sheet of the concern shows a true and fair view of the state of affairs of the concern or not. Investigation is done for some specific purpose to the necessity of the situation. Object will depend on the term of engagement for investigation.
2.       Compulsory As per Companies Ordinance 1984, Audit is compulsory in case of joint Stock Company. Investigation is not legally examination. It will depend on particular requirements in the circumstances.
3.       Nature In case of audit, it is usually carried out in the form of test checking. Investigator is through examination of books of accounts for a particular year.
4.       Appointment Auditor may be appointed by directors, (1st + auditor) by shareholder of the business concern. Investigator may be appointed by the proprietor or by the third party also.
5.       Trading perion Audit of books of accounts is for six month or for a full year. Appointment of auditor is made for full year. Investigation of books of accounts and records may extend ten years. There is no limit of time period.
6.       Documents It is not so with regard to audit. Audit is not carried out of audited financial statements. Investigation is usually carried on even though accounts have already been audited.
7.       Adjustment This is not required in case of audit. Net profit disclosed by audited accounts is final without further adjustments. In investigation, it may become necessary to mark certain adjustment in the annual account.
8.       Report Format, contents of audit report are clearly given in Companies Ordinance 1984. Report is prepared under this ordinance and presented to shareholders in annual general meeting. The investigation report is prepared according to the necessity of situation. Report is presented to appointing authority.
9.       Qualification Companies Ordinance 1984 prescribes the qualification of an auditor; he must be a chartered accountant. Any person with any qualification, a man who knows the art of investigation.
10.   Utility The result of auditing is widely used. The result of investigation beneficial only to the client.
11.   Parties for whom conducted Conducted on behalf of shareholders or proprietor or partners, or government or court. It is usually conducted on behalf of outsiders like prospective buyers, investors lenders etc.
12.   Repetition of work Once the accounts have been audited further investigation may be done for some specific object. Normally no further investigation of account, which already have been investigated.
13.   Preconceived notion Audit is never started with foregone conclusion that there is something wrong. Investigation involves critical examination of account with some preconceived notion about the state of affairs of the concern under investigation.
14.   Procedure Auditor use particular procedure and determined work programme to I assure that financial statement are free from material misstatement. Investigator use substantive procedure (i.e. detail checking), which ensures more satisfaction required for investigation.
15.   Determination of standards Audit involves determining that the financial statements have been prepared his accordance with international accounting standards and local laws. Compliance of disclosure requirements is not covered. No need to determine conformity with local and international standards.
16.   Use as a evidence Audit report can be used as evidence because it is a legal document. The report is used as a personal document and cannot be used as evidence.
17.   Disclosure of information The audit of business requires full disclosure of information. It is not legal requirement to disclose information.
18.   Accounting policies followed The auditor has to state whether the accounting policies of the organization has been followed or not. The investigator has no concern with the accounting policies followed or not.
19.   Audit/investigation program Audit programme is prepared before the actual work is started. In investigation no work program is provided.
20.   Recommendation After audit work the auditor has not right to recommend any course of action unless he is asked to do so. The investigator can recommend the course of action to overcome the deficiencies.


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