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Auditing vs. Investigation — What's the Difference?

Edited by Tayyaba Rehman — By Urooj Arif — Updated on May 15, 2024
Auditing is a systematic, objective assessment of financial statements and records, typically conducted annually, to ensure accuracy and compliance, Investigation involves a detailed, specific examination often triggered by suspicions of wrongdoing.
Auditing vs. Investigation — What's the Difference?

Difference Between Auditing and Investigation

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Key Differences

Auditing involves the review of financial records and systems in an organization to verify their accuracy and adherence to statutory and internal guidelines. This process is usually periodic and preventive, covering broad financial operations. On the other hand, an investigation is more targeted, initiated to explore specific issues like fraud, discrepancies, or non-compliance in detail.
Auditors generally follow standardized procedures and guidelines, such as Generally Accepted Auditing Standards (GAAS), to assess the fairness of financial statements. Conversely, investigations might not follow a set protocol, as the methods and depth of inquiry depend on the nature and scope of the suspected problem.
The objective of auditing is to provide assurance that financial statements are free from material misstatement and give a true and fair view of the financial status of the entity. In contrast, the goal of an investigation is often to uncover specific facts about irregularities, identify responsible parties, or gather evidence for legal proceedings.
While auditing is typically performed by internal or external auditors engaged by the organization itself, investigations can be conducted by a variety of professionals, including forensic accountants, external investigators, or even law enforcement agencies, depending on the issue's severity.
Auditing results in a report that highlights the financial health of an organization and any anomalies that require attention but don’t necessarily indicate misconduct. Investigation reports, however, are focused on the particular areas of concern and can lead to legal or disciplinary actions based on findings.
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Comparison Chart

Purpose

Ensure accuracy, compliance with laws and regulations
Uncover specific facts, resolve discrepancies

Scope

Broad, covers general financial statements
Narrow, focused on specific areas

Standards

Follows GAAS or similar standards
May not follow a standardized approach

Result

Audit report with findings and recommendations
Detailed report potentially leading to legal action

Conducted by

Internal/external auditors
Forensic accountants, external investigators

Compare with Definitions

Auditing

A systematic examination of books, accounts, statutory records, and documents of an entity.
The company undergoes an external audit every fiscal year.

Investigation

Often triggered by suspicion or evidence of wrongdoing.
An investigation is underway to determine the extent of the reported fraud.

Auditing

Can be internal or external depending on the auditor's relationship to the organization.
Internal auditing is conducted by auditors employed by the organization.

Investigation

A detailed examination focused on uncovering specific information.
The financial investigation was launched after discrepancies were noted in the accounts.

Auditing

Helps ensure that financial records are kept accurately and laws are complied with.
Auditing helps in identifying any unintentional accounting errors.

Investigation

Results can have significant legal implications.
The findings from the investigation led to several arrests.

Auditing

Performed by professionals adhering to specific standards.
She is studying to become a certified public auditor.

Investigation

Not limited to financial issues, but often used in such contexts.
The company hired a specialist to conduct a thorough investigation into the embezzlement claims.

Auditing

Aimed at providing an opinion on the financial statements.
The auditor issued a clean opinion after the annual audit.

Investigation

Can involve complex data analysis and interviews.
The investigator used advanced forensic tools to analyze the financial transactions.

Auditing

An examination of records or financial accounts to check their accuracy.

Investigation

The action of investigating something or someone; formal or systematic examination or research
He is under investigation for receiving illicit funds

Auditing

An adjustment or correction of accounts.

Investigation

The act or process of investigating
A politician under investigation.

Auditing

An examined and verified account.

Investigation

A careful examination or search in order to discover facts or gain information.

Auditing

A thorough examination or evaluation
An audit of water use.

Investigation

The act of investigating; the process of inquiring into or following up; research, especially patient or thorough inquiry or examination
The investigation into the crime has led to various leads as well as plenty of dead ends.
Despite thorough investigation, the perpetrator of the attacks remains unknown.
Carry out an investigation
The matter is awaiting investigation
The case is still under investigation.

Auditing

To examine, verify, or correct the financial accounts of
Independent accountants audit the company annually. The IRS audits questionable income tax returns.

Investigation

The act of investigating; the process of inquiring into or following up; research; study; inquiry, esp. patient or thorough inquiry or examination; as, the investigations of the philosopher and the mathematician; the investigations of the judge, the moralist.

Auditing

To attend (a course) without requesting or receiving academic credit.

Investigation

An inquiry into unfamiliar or questionable activities;
There was a congressional probe into the scandal

Auditing

To examine or evaluate (something) thoroughly
Audit a house's energy consumption.

Investigation

The work of inquiring into something thoroughly and systematically

Auditing

To conduct an audit.

Auditing

Present participle of audit

Auditing

The act or result of performing an audit.

Common Curiosities

What triggers an investigation?

Investigations are typically triggered by suspicions of fraud, discrepancies, or specific allegations.

What is the outcome of an investigation?

The outcome can include detailed reports, identification of wrongdoers, recovery of losses, and initiation of legal actions.

Who performs audits?

Audits are performed by internal or external auditors.

Are investigation results public?

The publicity of investigation results depends on the case; some may be kept confidential while others are made public, especially if involving public entities.

What skills are required for an investigator?

Critical thinking, attention to detail, and a thorough understanding of legal and financial systems.

What is the main purpose of an audit?

To verify the accuracy of financial statements and ensure compliance with applicable laws and regulations.

What happens if an audit finds a problem?

Findings from an audit can lead to recommendations for improvements and corrections in financial practices.

What types of investigations are there?

Financial, legal, compliance, and operational are common types of investigations in a corporate context.

Can an audit detect fraud?

While audits can detect irregularities that may indicate fraud, they are not primarily designed to uncover fraud.

How often are audits conducted?

Audits are usually conducted annually, but the frequency can vary based on regulatory requirements and organizational policies.

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Author Spotlight

Written by
Urooj Arif
Urooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
Tayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.

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