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Auditing Vs Investigation:
Investigation is an enquiry into the accounts and records of a business concern for a special purpose, say, to know the actual financial position of the concern or to know the real earning capacity of the business or to know the extent of fraud, if any. There are many differences between the two. They are:
| Points of difference | Auditing | Investigation |
| 1. Objects | The object is to find out whether balance sheet and profit and loss account exhibit a true and fair view of business. | It is undertaken to know the essential facts about a matter under inquiry. It is done with some special purpose of view. |
| 2. Period | It usually covers one accounting year. | It may cover more than one accounting year. |
| 3. Conducted | It is conducted for proprietors only. | It is carried out on behalf of any party interested in the matter. |
| 4. Scope | It is restricted to balance sheet and profit and loss account. | It is wider in scope. It may be carried out beyond balance sheet. |
| 5. Compulsion | Audit is legally compulsory for companies. | It is voluntary. It is required under certain circumstances. |
| 6. Time | It may be conducted at the end of the year. | It may be conducted at any time in case of suspicion about any transaction. |
| 7. Report | Form of report is prescribed. It is presented to the shareholders. | Form of report is not prescribed. It is presented to the client. |
| 8.Appointment | Owners appoint the auditors. | Even third party can appoint an investigator. |
| 9.qualifications | The statutory auditors must possess proper qualifications. | Even an employee preferably a chartered accountant may be appointed as investigator. |
| 10. rework | Re - audit is not generally undertaken. | Re - investigation may be undertaken. |
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FAQs on Auditing vs Investigation - Auditing Concepts, Auditing & Secretarial Practice - Auditing and Secretarial Practice - B Com
| 1. What is the difference between auditing and investigation? |  |
Ans. Auditing and investigation are two different concepts in the field of accounting. Auditing is a systematic process of examining financial records and statements to ensure accuracy and compliance with laws and regulations. It focuses on evaluating the internal controls and financial statements of an organization. On the other hand, investigation refers to the process of conducting a detailed examination or inquiry into a specific issue or problem, such as fraud, embezzlement, or financial misconduct. While auditing is a routine procedure, investigations are usually initiated to address suspected irregularities or discrepancies.
| 2. What are the key concepts of auditing? | |
Ans. Auditing involves several key concepts that are essential for its effective implementation. These concepts include independence, objectivity, materiality, risk assessment, and evidence. Independence refers to the auditor's ability to maintain an unbiased and impartial approach while conducting the audit. Objectivity ensures that the auditor's judgments and decisions are based on facts and evidence rather than personal biases. Materiality refers to the significance of an item or information in relation to the overall financial statements. Risk assessment involves identifying and assessing the risk factors that might affect the financial statements. Lastly, evidence refers to the information gathered and evaluated by the auditor to support their findings and conclusions.
| 3. How does auditing relate to secretarial practice? | |
Ans. Auditing and secretarial practice are closely related in the corporate world. Secretarial practice refers to the administrative and compliance functions performed by a company secretary, such as maintaining statutory records, ensuring compliance with laws and regulations, and organizing board meetings. Auditing, on the other hand, involves the examination and evaluation of financial records and statements to ensure accuracy and compliance. In the context of secretarial practice, auditing plays a crucial role in ensuring the reliability and integrity of the financial information presented to the board of directors and shareholders. It helps in verifying the compliance of secretarial practices with legal requirements and provides assurance to stakeholders regarding the company's financial health.
| 4. What are the main responsibilities of an auditor during an audit? | |
Ans. The main responsibilities of an auditor during an audit include planning and conducting the audit, assessing risks and internal controls, gathering and evaluating evidence, and reporting the findings. During the planning phase, the auditor identifies the scope and objectives of the audit, and develops an audit plan. In the conduct phase, the auditor performs various audit procedures, such as examining financial records, conducting interviews, and testing internal controls. Risk assessment involves identifying and assessing the risk factors that might affect the financial statements. Gathering and evaluating evidence involves collecting relevant information and evaluating its reliability and relevance to the audit objectives. Finally, the auditor prepares an audit report summarizing the findings, conclusions, and recommendations based on the audit procedures performed.
| 5. How does an investigation differ from an audit? | |
Ans. An investigation differs from an audit in several ways. While an audit is a routine process conducted periodically to evaluate the accuracy and compliance of financial records, an investigation is usually initiated to address specific issues or suspected irregularities, such as fraud, embezzlement, or financial misconduct. Audits are generally conducted by internal or external auditors, while investigations may involve specialized forensic accountants or investigators. Audits focus on evaluating the internal controls and financial statements of an organization, whereas investigations involve a detailed examination or inquiry into specific issues or problems. Additionally, audits aim to provide assurance to stakeholders, while investigations aim to uncover and address potential wrongdoing or misconduct.
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