Auditing is used to determine the extent to which an entity's financial records are accurate and fair, whereas investigation is used to prove a specific fact. The auditing scope is determined by the Standards on Auditing, while the scope of the investigation is determined by the conditions of engagement. Due to a lack of knowledge and comprehension, it is extremely common for people to become confused between these two terms.
Difference between Auditing and Investigation
| Basis | Auditing | Investigation |
|---|---|---|
| Meaning | The process of reviewing and reporting on an entity's books of accounts is known as auditing. | Investigation is a type of investigation that is carried out to establish a specific fact or truth. |
| Owners | The audit is undertaken only for the benefit of the owners, who schedule the appointment. | An investigation might be carried out by the undertaking's owner or by a third party. |
| Purpose | To determine the truth and fairness of a situation. | It differs from one company to the next. |
| Process | Process that is followed every day | Investigation isn't something you do every day. |
| Scope | It just entails a review of a company's financial records. | It includes not only a study of the finances, but also an investigation into other matters related to the objective for which it is being conducted. |
Key Differences Between Auditing and Investigation
The key distinctions between auditing and investigation are as follows:
1. Auditing is the practise of evaluating a company's financial statements and then providing an impartial judgement on them. Investigation is a meticulous and detailed examination of the books of accounts in order to discover the truth.
2. Auditing is a broad review, whereas investigation is more focused.
3. The evidence gathered during the audit process is convincing. The sort of evidence gathered through the investigation process, on the other hand, is conclusive.
4. Auditing is done once a year, however investigations are done according to the demands of the company.
5. An audit is carried out by an auditor, whereas an inquiry is carried out by a team of experts.
6. Every business must conduct audits. The investigation, on the other hand, is a private matter.
7. Auditing validates the financial statement's honest and fair picture, whereas investigation establishes a reality.
8. The appointment of an auditor is determined by the company's shareholders. In contrast, the owners/management or a third party appoints an investigator.
9. The scope of auditing is broad, with the goal of providing an opinion on the company's financial statements. The scope of the inquiry, on the other hand, is limited because it only attempts to answer the issues posed in the engagement letter.