Introduction: Auditing and Investigation

Auditing and Investigation:

            Sometimes students get an impression that auditing and investigation mean the same thing. There is a lot of difference between the two. Investigation means a searching inquiry into the profit-earning capacity or the financial position of a concern or to find out the extent of the fraud if there is any suspicion about it and so on.

1. Audit is conducted to find out whether the balance sheet is properly drawn up and exhibits a true and fair view of the state of affairs of a concern while investigation is carried out with a certain object in view, e.g., to find out the profit-earning capacity, or the financial position of a concern or a fraud and the extent thereof.           
2. investigation covers several years, say, 3, 5, or 7 years to find out the average earning capacity, financial position, etc., of a concern while audit usually relates to one year.
3. Investigation may be carried out on behalf of outsiders while audit is conducted on behalf of the proprietors only. However, investigation may also be carried out on behalf of proprietors in some cases where fraud or defalcation is suspected.

We shall, however, deal with this topic in detail, in the chapter on “investigation”.