INVESTIGATION
Que.
1. Define the term investigation.
Ans.:
Investigation is a process of examination beyond the books of accounts in
search of factors responsible for either higher profitability or for continued
losses or for unsatisfactory state of affairs prevailing in the business or in
any form of organization.
Que.
2. Give two features of investigation.
Ans.:
1. Specific object: It is critical examination of books of accounts when the
need arises with specific objects, such as when fraud is suspected, when huge
money is to be advanced to a single big borrower, when a running business is to
be purchased or sold.
- Scope of Investigation: The scope
of investigation may extend to a period of three to five years and even
beyond the books of accounts.
Que.
3. Give two objectives of Investigation.
Ans.:
1. Purchase of a running Business: Investigation may be caused on behalf of any
persons or companies to make decision on purchasing a running business.
- Investigation on Behalf of
Incoming partner: A person before joining a partnership firm has to
confirm whether joining a firm and introducing capital gives him a
expected return and protect his interest or not is to be examined and a
wise decision needs to be taken. It is the financial expert agency that can
give correct advice based on detailed investigation.
Que.
4. Give two distinctions between audit and investigation.
Ans.:
1. Compulsion: For companies auditing is compulsory whereas investigation is
not compulsory, it is only a voluntary action.
- Period: Audit is a regular feature
it covers a period of one year, whereas investigation may cover a period
of three to seven years.
Que.
5. Specify the two qualities of investigation report?
Ans.:
1. Written Letter: An investigator to be on safer side, he should get the
appointment letter in writing clearly specifying the object for which the
investigation is conducted.
2.
Expert's Opinion: Wherever necessary he may seek the opinion d experts like
valuators, assessor, plant engineers, production engineers, management
consultants and financial consultants in arriving at conclusions on various
financial issues under consideration.
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