What do you mean by Auditing? Distinguish between
Auditing and Investigation.
Answers
Answer:
In general, Auditing is conducted to verify the extent of truthfulness and fairness of the financial records of an entity, but Investigation is performed to prove a certain fact. The scope of the auditing is based on the Standards on Auditing, but the scope of the investigation rests on the terms of engagement. It is quite normal that people get confused between these two terms easily due to lack of knowledge and proper understanding.
Auditing is a process of identifying whether the results of accounting information are accurate and according to the specified norms or not. Unlike investigation is a severe examination of specific records so as to highlight a fact. The article attempts to shed light on the difference between conventional auditing and investigation.
Explanation:
Key Differences Between Auditing and Investigation
The following are the major differences between auditing and investigation:
1.The process of inspecting the financial statement of an entity and then giving an independent opinion on it is known as Auditing. A careful and detailed study of the books of accounts to discover truth is known as Investigation.
2.Auditing is a general examination while Investigation is critical in nature.
3.The evidence obtained from audit process are persuasive. Conversely, the nature of evidence obtained from Investigation process is conclusive.
4.Auditing is conducted every year, but Investigation is conducted as per the needs of the organisation.
5.Auditing is performed by the auditor whereas an expert team does the performance of an investigation.
6.Auditing is compulsory for every company. On the other hand, the investigation is discretionary.
7.Auditing verifies the true and fair view of the financial statement while Investigation is performed to establish a fact.
8.the appointment of an auditor is made by the shareholders of the company. As against this, an investigator is appointed by the owners/management or one-third party.
9.The scope of auditing is general, which attempts to give an opinion on the financial statement of the company. On the contrary, the scope of the investigation is limited as it attempts to answer only those questions that are asked in the engagement letter.
Conclusion
Auditing is a general process which is common for all the organisation, as it is performed annually. It can be performed either the internal auditor or external auditor. The internal auditor is an employee of the organisation who is appointed by the management while the government appoints the external auditor.
The investigation is quite rare, as it is not commonly performed in any organisation. An expert team is brought to the organisation to conduct it and report the relevant facts. The audit report is submitted to the interested parties like shareholders, creditors, government, suppliers, management, etc. whereas the investigation report is handed over to the party who organised the investigation.