Investigation Bcom Notes

Investigation Bcom Notes:- In this post, I am giving you the notes of Bcom 3rd Year auditing, which is going to be very useful in your examination and you should share this post to all friends and all your groups so that your friends also read this post. Could. Investigation Bcom Notes PDF

Investigation

Meaning of Investigation

An investigation is a critical examination of the books and accounts with a view to ascertaining any fact for some special purposes. It involves in-depth examination and enquiry into facts behind the books and accounts.

An investigation implies something more than the verification of the accuracy of the figures of the balance sheet. In an investigation, examination is intensive as well as exhaustive so far as the activities or area of accounting under investigation is concerned. In short, the term investigation may be described as special audit. It is always carried out with the object of establishing a fact or obtaining information of a particular nature required by a client.

According to Spicer and Peglar, “The term investigation implies an examination of records for some special purpose.”

Investigation Bcom Notes PDF

Characteristics of Investigation

It relates to a special and specific objects only.
Its scope may be extended or curtailed according to its objectives.
It is a critical examination and verification of specific records for a specific period.
It is started with a suspicious mind and propose as future course of action alongwith the report on the existing situation.
Its report is analytical, descriptive and exhaustive, so that relevant and correct conclusions may be drawn and action initiated.

Investigation Bcom Notes PDF

Objects of Investigation

Investigation may be conducted for the following purposes:

(1) To Join a Partnership Firm: A person before joining a partnership firm will like to know the profitability, financial state of affairs of the assets, efficiency and the extent of the use of the capacity of the fixed capital in the firm, can appoint a person to conduct the investigation.

(2) To purchase a running business: A purchaser of an existing business may be interested to know the earning power and the future prospects of the business. He would like to know the worth of the business and how much he should pay for that business. The investigator has got a higher responsibility in this case as he would take the decision on the basis of his report.

(3) To lend money: Banks and the financial institutions are the main sources from where one can borrow money. Before extending a loan to a customer, a bank would naturally like to examine thoroughly the financial position of the party. If the amount to be lent is a heavy one, the bank appoints an investigator to investigate the financial position of the borrower and to advise whether the money should be lent to the party or not.

(4) To detect fraud: Investigation is done, sometimes to detect a suspected fraud. Fraud is generally done by those who handle cash and goods. The investigator should know from his client, the nature of fraud suspected and names of suspected persons. There is more possibility of fraud, if the internal check system is weak.

(5) For the valuation of shares: The valuation of the shares of a public company listed on the stock exchange is easy but as the shares of a private limited company cannot be sold or purchased in the open market, its valuation is difficult. An investigation may be conducted on behalf of a prospective shareholder who wishes to make a valuation of shares of a limited company.

(6) To seek different avenues of investment: When a person has to make an investment in a business, he keeps many factors in mind such as goodwill, earning capacity, future of its product and its financial position. Thus, when a person seeks different avenues of investment, an investigation may be conducted by him.

(7) When affairs of the company are not being properly managed: The Central Government may appoint one or more competent persons as investigators to investigate into the affairs of any company and to report to the Central Government when it is suspected that the affairs of the company are not being properly managed.