Distinguish between Audit and Investigation.

Difference between Audit & Investigation Legal binding: Audit of annual financial statements of a company is compulsory under the Companies Act, 1956. However, Investigation is not compulsory under the Companies act, 1956 but voluntary depending upon necessity. Object in view: Audit is conducted to ascertain whether the financial statements show a true and fair view. Investigation is conducted with a particular object in view, viz to know financial position, earning capacity, prove fraud, invest capital, etc. Period covered: Audit is conducted on annual basis. Investigation may be conducted for several years at a time, say three years. Parties for whom conducted: Audit is conducted on behalf of shareholders (or proprietor, or partners). Investigation is usually conducted on behalf of outsiders like prospective buyers, investors, lenders, etc. Documents: Audit is not carried out of audited financial statements. Investigation may be conducted even though the accounts have been audited. Extent of work: Audit is normally conducted on test verification basis. Investigation is a thorough examination of books of accounts. Report: Audit report of a company is addressed to shareholders (or proprietors or partners). Investigation report is addressed to the party on whose instruction investigation was conducted. Person performing work: Audit is to be conducted by a person having prescribed qualification i.e. Chartered accountant, Cost accountant. No statutory qualification is prescribed for Investigation. It may be undertaken by any one.