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Difference between Investigation and Auditing



The difference between Investigation and Auditing is given below:
  1. Audit is considered on behalf of the shareholders or propriteors, while investigation is usually carried out on behalf of outsiders who intend to purchase the business or who wish to lend money and thus want to know the earning capacity or the financial position of the concern. However it may be carried out by the proprietor where they suspect any fraud or by the central government at the instance of the shareholders or the court.
  2. Accounts of a Joint Stock Company must be audited according to law while investigation is not compulsory.
  3. Investigation may be conducted even though the accounts have been audited while audited accounts are not audited again except in the case of special audit under section 233A.
  4. The audit of accounts is usually for a year or six months, while investigation may cover a period extending over three to seven years.
  5. Audit is a kind of test checking while investigation is a thorough examination of the books of account for a particular year or a number of years.
  6. Audit includes an examination of the books of accounts of a business while investigation is not only an examination of accounts but it is also an inquiry into other factors affecting the business such as the extent of fraud, who committed it, the causes of the fall of the profits, and so on and the investigator has therefore to go beyond the books of accounts.
  7. The report of the investigator is sent to the party which appointed him for the purpose of investigation while report of the auditor is sent to the managing director/chairman of the company who places it before the shareholders.
  8. The report of the investigator is positive report while the report of the auditor is generally in short form and somewhat negative as it refers to the shortcomings, if any but does not refer in details to the audit methods or approach.p 
  9. The accounts are audited with a view to ascertaining whether or not Balance sheet is drawn up according to law and that the profit and loss account and the balance sheet exhibits true and fair view of the state of affairs of the concern. While investigation is conducted with a particular object in view to know the financial position of the concern or its earning capacity etc.

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