Auditing and investigation may sound a bit the same; however, it differs in terms of engagement. In general, Auditing verifies the legitimacy of the information or processes. At the same time, the Investigation is a close examination of records and evidence to prove a specific fact.
While both were considered as part of the organization’s activities to ensure that a higher standard of procedure or processes are met, an investigation is infrequent. Investigative auditing is only ruled out depending on the Audit results, especially when some cases proved to be suspicious of fraudulent activities.
Auditing vs Investigation
The main difference between Auditing and Investigation is that auditing is examining and reporting on books of accounts of a company while the investigation is a process of knowing a particular fact, truth or incident. Auditing requires general inspection whereas investigation requires focus and in-depth examination. Auditing is conducted annually but the investigation is conducted according to the requirement of the client.
They also differ in terms of people involved in carrying out the Audit and Investigation. Auditing requires only chartered auditors while investigation requires people with expertise both on investigation and accounting fields.
An Auditor is a person authorized to verify or review the accuracy of financial records while an investigator carries out an investigation or a formal inquiry.
Comparison Table Between Auditing and Investigation
| Parameter of Comparison | Auditing | Investigation |
|---|---|---|
| Definition | Is an examination or inspection of records, processes and activities to ensure compliance and integrity. | An extensive investigation to prove a particular fact. |
| Depth | General examination. | Critical and extensive. |
| Purpose | To build and maintain trust within an entity or group, prevents fraudulent activities and ensuring high standards and processes is always upheld. | This is only conducted when there is a potential dishonesty on a certain fact. |
| Nature of Report | General | Confidential |
| Mandatory | Yes | No |
| Performing entities | Internal or External Auditor/Accountant | Experts |
What is Auditing?
An Auditing or Audit is an inspection or examination of processes, activities, and records to ensure compliance or requirements.
Most Audit we’ve known refers to financial auditing, wherein a series of accounts or business books, documents, or records inspected to determine if they’re accurate and following the rules and laws.
Auditing is required to help build trust and confidence within a company or onto a specific entity that requires public trust. For companies, an internal audit takes place at least annually to ensure fraud prevention. There are at least nine (9) different types of Audit:
- Internal Audit – takes place within a company, meaning, the Auditor is also working under the same community. Most businesses use the internal Audit to check the business’s finances and evaluate operation processes to ensure compliance.
- External Audit – is being conducted by a third party entity that is not connected to the company or a person being audited. Most common external Auditors are someone from an independent accounting firm, the IRS, or from a tax agency.
- Financial Audit – one of the most common types of Audits. An external Auditor is commonly hired to conduct a financial audit in a company to ensure the accuracy of business financial records and statements. An auditor is inspecting everything connected to financial matters, may it be business transactions, creditor, or investors.
- Operational Audit – has the same goal as Internal Audit. Operational Audit analyzes the company’s goals, processes, procedures, and results. Auditors may be both internal and external.
- Compliance Audit – refers to the compliant to specific business processes and rules against the external laws.
- Payroll Audit – is an internal type of Audit conducted by an Auditor to ensure payroll accuracy. Auditing involves employee’s wages, taxes, benefit deductions, employee information, and withholding.
- IRS Tax Audit – is conducted to ensure the accuracy of the filed tax returns. Making sure that there is no discrepancy or that the company did not overpay or underpay taxes.
- Information System Audit – refers to an Audit for the software and IT companies.
- Pay Audit – refers to the identification of pay discrepancies within the employees.