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QNO Audit Vs Investigation Old Course -- (P16M/SM21/M23R)
COA.07 Bhaskar CNO C1OC.200
An audit is distinct from investigation. However, it is quite possible that sometimes investigation results

from the prima facie findings of the auditor. Discuss.
Answer We have to clearly understand that audit is distinct from investigation. Investigation is a critical
examination of the accounts with a special purpose. For example, if fraud is suspected and it is specifically
called upon to check the accounts whether fraud really exists, it takes character of investigation.

The objective of audit, on the other hand as we have already discussed, is to obtain reasonable assurance
about whether the financial statements as a whole are free from material misstatement, whether due to
fraud or error, thereby enabling the auditor to express an opinion.

Therefore, audit is never started with a pre-conceived notion about state of affairs; about wrong doing;
about some wrong having been committed. The auditor seeks to report what he finds in normal course of
examination of accounts. However, it is quite possible that sometimes investigation results from the prima
facie findings of the auditor. It may happen that auditor has given some findings of serious concern. Such
findings may prompt for calling an investigation.

QNO— Engagement to Check Fraud New Course – (SM25/S24M)
COA.07.50 Bhaskar CNO - C1OC.200
A Chartered Accountant is specifically asked to check accounts whether fraud exists. State with
reasons whether it is an example of reasonable assurance engagement.
OR
The management of Cool Drinks Limited suspects that some employees of the company may be
involved in making fraudulent payments to dummy workers at its various plants in the country.
Therefore, they are considering appointment of a firm of auditors to conduct audit involving detailed
examination of accounts. However, one senior person among Board members, Mr. P, objects to use of
word “audit” in proposed assignment. Comment. Also, discuss how audit is different from
investigation.
Answer Audit: The objective of audit is to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor
to express an opinion.

Investigation: Investigation is a critical examination of the accounts with a special purpose. For example,
if fraud is suspected and it is specifically called upon to check the accounts whether fraud really exists, it
takes character of investigation.

Conclusion: It is not a reasonable assurance engagement. It is in nature of investigation.

QNO— Engagement to Check Books for Assessing Loss New Course – (SM25)
COA.07.60 Bhaskar CNO - C1OC.045
A huge fire broke out in NOIDA plant of KT Limited. Plant assets comprising building, machinery
and inventories were insured from branch of a public sector insurance company. Apart from an
insurance surveyor who was deputed for assessing loss, the regional office of insurance PSU also
appointed a CA for verification of books of accounts/ financial records of the company and
circumstances surrounding the loss. He was also requested to submit an early report. Would the
report by CA in nature of audit report?
Answer Audit
The objective of audit is to obtain reasonable assurance about whether the financial statements as a

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