Learn about the different types of account investigations and their objectives in this informative article on the investigation of accounts.
Investigation of Accounts: What Are Its Types and Objects
Investigation means an inquiry into the accounts of a business for special purpose It is the audit which is conducted for a particular object. It is an examination of books of accounts of a business to know the actual financial position or earning capacity.
- TAYLER AND PERRY
“Investigation involves an inquiry into the facts behind the books and accounts into the technical, financial and economic position of the business, house or organization”.
- SPICER AND PEGLER
Investigation is an examination of accounting records for some special purpose”.
- R. HOWARD
“Investigation is an examination of the accounts and balance sheet of any organization and the supporting documents for the specific purpose of obtaining information to be submitted to an interested party”.
TYPES OF INVESTIGATION
Following are the important kinds of investigation:- 1. Investigation for the purpose of a business.
- Investigation for preparing a report.
- Investigation for credit purpose.
- Investigation for detection of fraud.
Types of Account Investigations
- Forensic Accounting: This type of investigation focuses on uncovering financial discrepancies, misappropriation of funds, or fraudulent activities within an organization. Forensic accountants use a combination of accounting, auditing, and investigative skills to analyze financial data and present evidence in court if necessary.
- Internal Audit: Internal auditors are responsible for evaluating the effectiveness of internal controls, risk management procedures, and compliance with laws and regulations. They conduct routine audits to identify any irregularities or inefficiencies in the organization’s financial operations.
- External Audit: External auditors are independent professionals who review a company’s financial statements to provide an opinion on their accuracy and fairness. These audits are typically required by regulatory authorities, shareholders, or lenders to ensure the company’s financial health and adherence to accounting standards.
OBJECTS OF INVESTIGATION
The following are the main objects for which investigation are usually undertaken:-
L PURCHASE OF BUSINESS
Investigation is made to know the financial position or earning capacity of the business on behalf of the person who wants to purchase an established business.
- ENTRY OF NEW FIRM
Investigation is made to know the financial position or earning capacity of the business on behalf ot the person who wants to join an established business as partner.
- LOAN PURPOSE
Investigation is made to know the financial position of the business on behalf of the person who wants to grant the loan to business.
- PURCHASE OF SHARES
Investigation is made to know the real position of the company on behalf of a person who wants to purchase the shares of the company.
- SUSPECTED FRAUD
Investigation is made on behalf of the proprietor of a business where fraud is suspected 6. INSURANCE CLAIMS
Investigation may be conducted for claims under insurance policy covering the losses.
- REMOVAL OF BUSIN ESS
Investigation is conducted to find out the amount of compensation payable on the compulsory removal of business.
- ALLEGED NEGLIGENCE
Investigation may be conducted on behalf of the company or any person, if there is a charge of negligence on auditor
9. FLUCTUATION IN PROFITS
Investigation may be conducted on behalf of the proprietor of a business where there are abnormal fluctuations in profits.
- CASE OF MISAPPROPRIATION
Investigation may be conducted on behalf of the beneficiaries where trustees are suspected fraud or misappropriation.
- TAXATION SETTLEMENT
The purpose of investigation may be to know the true income by income tax department.
- COLLABORATION
The purpose of investigation may be merger of two concerns. Sometimes due to certain circumstances two concerns collaborate, investigation is very helpful for merger
