## Audit vs Investigation

### Key Distinction

Audit and investigation are two fundamentally different engagements, even though both involve examination of accounts.

Feature	Audit	Investigation
Purpose	General opinion on financial statements	Specific purpose (e.g., detecting fraud)
Scope	Broad and general	Narrow and specific
Initiated by	Statute / shareholders	Management or third party (specific suspicion)
Output	Auditor's report with opinion	Investigation report with findings

### Audit (SA-200 Definition)

Objective is to obtain reasonable assurance that financial statements as a whole are free from material misstatement, whether due to fraud or error, enabling the auditor to express an opinion.

### Investigation

A critical examination of accounts undertaken for a special purpose — e.g., when fraud is suspected and a specific check is required to determine whether fraud actually exists.

### Practical Implication

If an auditor is asked to check whether fraudulent payments were made to dummy workers, that assignment is an investigation, not an audit. Using the word "audit" for such an engagement is technically incorrect.

Worked example

### Example 1

Example (Q7 — MD 7, 4 Marks): Management of a company suspects that some employees may be involved in making fraudulent payments on account of dummy workers at its different plants. Mr. P objects to calling this assignment an "audit."

Analysis: Since the engagement has a specific purpose — to check whether fraud actually exists — it is an investigation, not an audit. Audit has a general and broad scope (forming opinion on financial statements), whereas investigation has a specific and narrow scope. Mr. P's objection is correct.

⚠️ Common exam mistakes

Confusing investigation with audit — remember: audit = general opinion; investigation = specific purpose.
Thinking audit can provide a guarantee of fraud detection — it cannot; that is the role of investigation when specifically commissioned.
Stating that scope of audit and investigation is the same — audit scope is broad; investigation scope is narrow.

Reference:

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