Page 336 - CA Final PARAM Digital Book.

QNO Audit Vs Investigation Old Course- (N04E, N10R, N12M, PM17, M17R, N18E, N19R, SM21)
632.000 TITANIUM CNO – INTG.020 New Course-- (SM23)
General objective of an audit is to find out whether the financial statements show true and fair view. On
the other hand, investigation implies systematic, critical and special examination of the records of a

business for a specific purpose. In view of the above, you are required to brief out the difference
between Audit and Investigation.
Answer ➢ Auditing
It involves examination of financial information contained in financial statements to express an

opinion whether or not the same have been prepared properly. In essence, auditing involves
independent examination of financial information prepared by the management of an entity.

➢ Investigation: -
• It implies systematic, critical and special examination of the records of a business for a
specific purpose.
• The examination conducted under investigation is intensive as well as exhaustive so far as
the activities or areas of accounting is concerned. Investigation requires a concentrated focus
on the subject matter of inquiry and related matters.

Basis INVESTIGATION AUDIT
➢ Objective It aims at establishing a fact or a To verify whether the financial
happening or at assessing a particular statements display a true and
situation fair view of the state of affairs
and the working results of an
entity.
➢ Legal Voluntary, in some companies it may be Mandatory for Companies.
Requirement ordered as per LAW For others, it is voluntary
➢ Who performs Any person, who may not be a Chartered A Chartered Accountant within
/ Conducted by Accountant. the meaning of the Chartered
Accountants Act 1949.
➢ Scope The scope of investigation may be The scope of audit is wide and in
governed by statute OR it may be non- case of statutory audit the scope
statutory. of work is determined by the
provisions of relevant law.
➢ Time Frame The work is not limited by rigid time The audit is carried on either
(Period frame. It may cover several years, as the quarterly, half-yearly or yearly.
Covered) outcome of the same is not certain
➢ Nature of Requires a detailed study and Involves tests checking or sample
activities examination of facts and figures technique to draw evidences for
performed forming a judgement and
expression of opinion
➢ Application of It is analytical in nature and requires a Is governed by compliance with
accounting thorough mind, capable of observing, generally accepted accounting
principles collecting and evaluating facts. There principles, audit procedures and
may not be any focus on accounting disclosure requirements.
principles and disclosures.
➢ Evidence It seeks conclusive evidence Audit is mainly concerned with
prima- facie evidence (Persuasive
Evidence).
➢ Reporting The outcome is reported to the person(s) The outcome is reported to the
on whose behalf investigation is carried owners of the business Entity.
out. (No particular format) (Format is generally fixed)
➢ Inherent No inherent limitation owing to its Audit suffers from inherent
Limitations nature of engagement. Limitation.

➢ Pre-Condition Its essence lies in going into the matter Audit is not based on suspicion
with some pre-conceived notion suited unless circumstances exist to
to the objective arouse suspicion

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