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Audit and Investigation - Unit One

Investigation involves examining accounts or matters for a specific purpose, unlike auditing which ascertains if financial statements show a true and fair view. Common investigations include those for business purchases, credit purposes, reorganizations, and suspected fraud. Investigations generally involve preparation, field work, and reporting. They differ from audits in objective, scope, timing, standard of care, extent of regulations, and depth of examination.

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2K views18 pages

Audit and Investigation - Unit One

Investigation involves examining accounts or matters for a specific purpose, unlike auditing which ascertains if financial statements show a true and fair view. Common investigations include those for business purchases, credit purposes, reorganizations, and suspected fraud. Investigations generally involve preparation, field work, and reporting. They differ from audits in objective, scope, timing, standard of care, extent of regulations, and depth of examination.

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Kananelo MOSENA
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AUDIT AND

INVESTIGATION
Introduction
Introduction
 Investigation implies the examination of accounts for some special purpose. It is different from
auditing which is carried out primarily to ascertain whether or not the financial statements
prepared show a true and fair view.
 Investigation is an act of examining, searching and inquiring into a matter with adequate care
and accuracy for the purpose of obtaining information of particular or specific nature.
 Investigations consist of various non-auditing tasks carried out by accountants, who usually
have served as auditors to the organisation.
 An auditor conducting an investigation is seen as an expert and should therefore exercise great
skill and care.
 The scope of work could be wider or narrower than auditing depending on the type of
investigation being conducted.
Scope of Investigations
The following are some of the investigations commonly
undertaken in practice.
Investigation on behalf of an individual or firm proposingto buy
a business or for investment purpose.
Investigation on behalf of a bank for credit purpose.
Investigation for the purpose of business re-organisation and
reconstruction or for merger and acquisition.
Investigation on behalf of a business where fraud is suspected or
known to have taken place etc.
General Approach to Investigative Work
 In carrying out investigations, the following stages can be
considered.
 Preparation: This stage involves preliminary review, obtaining written
instructions from the client and planning the investigation. The auditor
will need to be familiar with the business and understand the client’s
instructions so that he can plan his programme in accordance with the
instructions.
 Field work: It involves conducting the investigation proper by
ascertaining the facts and obtaining information from relevant people.
Information obtained will be verified and analysed.
General Approach to Investigative Work
• Reporting: At this stage the evidence is interpreted and next is
the writing of the report of the assignment. A draft report can be
prepared for discussion with the client to incorporate further work
where required by the client before the preparation of the final
report and its submission to the client.
Differences Between Investigations and
Conventional Audit
 Although both could have similar techniques and
procedures, investigations differ in certain important
aspects from conventional audits. Some of the
differences are:
Objective: The objective of conventional audit is to
primarily report on the truth and fairness of the financial
statement presented by the entity. That of investigation
varies and it is as specified by the client.
Differences Between Investigations and
Conventional Audit
 Scope: The scope of conventional audit is as laid down by statutes and
generally accepted auditing practice and covers the financial statements,
while investigation is as agreed by the client.
 Timing/Regularity: Conventional audits are carried out on an
annual basis. Investigations are carried out as at and when required.
 Expected standard of care: Since the needs of the client are usually
well defined, the degree of care that the investigating accountant must
exercise may be higher than that of the auditor.
Differences Between Investigations and
Conventional Audit
 Extent of Regulations: Conventional audits are governed by
companies regulations, which sets out the rights, duties and
responsibilities of the auditor. On the other hand, investigations are
governed by the terms of reference which is mutually agreed between
the client and the accountant.
 Depth of Examination: Investigations involve in-depth enquiry into
specific areas of the entity’s financial affairs. Conventional audits
require the auditor to carry out reasonable enquiry into each aspects of
the entity’s financial information, sufficient to enable him report on
whether it presents a true and fair view.
Conclusion
Questions for Class Discussions
 Define and Explain the term ‘Investigation’.
 Identify some investigations commonly conducted in practice.
 Enumerate and Explain the stages involved in the conduct of
investigations.
 Itemize and Explain some differences that exist between
conventional audits and investigations

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