Importance of Investigation in Auditing takes place anywhere it is required – in companies, religious organizations, schools, hospitals, sports, parliament, and other institutions. What constitutes investigation is suspicion of wrongdoing. This article, therefore, will discuss the importance of investigation in auditing. The article will start by first defining the investigation. Then we will discuss the process involved in the investigation before finally stating its importance in auditing.

The investigation is certainly an essential part of the auditing process whose application is required when a transaction is obscured. An investigation is administered in a bid to ascertain who’s responsible. This is also done to find out the extent of the damage. In simple terms, an investigation can also be referred to as thorough verification and clarification of uncertainty about a transaction or an incident.

The investigation, therefore, is a process that sets out to dig deep to discover information concerning an unearthed scandal. This could be from a suspicion of fraud or foul play. It entails a step-by-step process to ascertain the facts of the matter. Further, these will be included in the investigator’s report and determine the fate of those allegedly involved in the scandal.

Investigation in auditing usually takes place when there is a fraud that has been uncovered and there is a need to dig deeper into what really happened with regards to how much was stolen, the number of individuals involved, how long it has been happening, and how much is the damage thereof. An organization employs an investigator or team of investigators for this operation.

The following is the process involved in an audit investigation:


The first step in the process of investigation is auditing. Questions to do with resources needed to carry out the operation amicably are asked in this stage. It is also in the planning stage that an auditor or team of auditors determine which questions to ask those involved in the alleged scandal. Simply put, all technicalities regarding what will be required in the investigation are put in place before commencing.

Data Collection

Information about what transpired is gotten from various sources, not only the individuals involved or the witnesses but also from documents and since the investigation is mainly carried out when there is suspicion of financial fraud, things like receipts, bank statements, and payment slips are essential in the collection of information.

For example, an accountant gives someone $100 but instead of receipting the exact amount given, he or she writes a receipt that they have given out $200 meaning they have stolen $100, in this situation, an investigator examines the signature of the recipient of the money against what is on the receipt filed by the treasurer.

Data Analysis

Since an incident like fraud or misappropriation of funds is a series of events from the time the fraud began up to the time it is finally discovered, it is imperative that the auditor analyses the data collected before making any conclusion as concluding without a thorough analysis would be tantamount to an unsuccessful investigation.

Therefore, it is important for auditors not to make any premature conclusions which would then not result in not attaining the desired objectives which the investigation set out to achieve. In this step, auditors find out the number of people involved in the scandal if it did it really happened, the loophole which fraudsters took advantage of, and so on.


The final step in the investigation process is reporting the findings stemming from the audit investigation. It is here that an investigation comes to a conclusion when all issues have been closed out and the investigator is satisfied with what he or she has gotten from it and is ready to present the findings to the people that hired them to do the investigation for them. The investigation needs to answer all the questions, it should be clear and conclusive without leaving any stone unturned. It is also at this stage that a recommendation on the way forward is given by the auditor or investigator.

Importance of Investigation in Auditing

The importance of investigation in auditing, therefore, is that it helps in making well-informed decisions based on facts and not mere suspicion or rumors of wrongdoing by those accused of having committed an offense or crime in form of stealing or misappropriation of funds. As the law states that a person is innocent until proven guilty, there is a need then for a qualified, skilled, experienced, corrupt-free, and unbiased individual to prove the innocence or guiltiness of the accused and in the case of auditing, a certified public accountant or otherwise referred to as an auditor, external auditor to be precise, is the one who is engaged by a company.


The importance of investigation in auditing is that it helps key decision-makers make well-informed decisions. It also gives them facts about what really transpired in an alleged scandal.