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The main difference between Accounting and Auditing is that Accounting is an act of orderly capturing the day to day monetary transactions of the business and classifying them into various groups, and Auditing is an activity of verification and evaluation of financial statement.
Accounting vs. Auditing
Accounting is an action of maintaining the monetary records of a company in a way that they can help in the preparation of financial statements which will give a true and fair view of the business of the company. Whereas auditing is the evaluation of financial records/statements prepared through the accounting function. The objective is to ensure the reliability of the financial statements. Accounting Standards are granted by International Accounting Boards which need to be adhered to while preparing financial statements. On the other side, auditing Standards are issued by International Auditing Boards which need to be adhered to while auditing financial statements. Accounting aims to provide a true and fair view of the financial statements to various users, and auditing aims to verify the reliability of the financial statement’s true and fair view. In accounting, work is performed by bookkeepers and accountants, whereas in auditing work is performed by auditors. An accountant is part of the average-level management of the organization. Here, the task is to present a true and fair view of the financial position of the company to various stakeholders. On the contrary, an auditor can be internal as well as external to the organization. In a way, the level of charge of the auditor is more than the accountant. The report published by them is a certification of the work done by the accountant.
What is Accounting?
Accounting is the systematic and complete recording of financial transactions about a business. Accounting also relates to the process of summarizing, analyzing and reporting these transactions to oversight agencies, regulators and tax collection entities. The financial statements that abstract a large company’s operations, financial position and cash flow over a particular period are a concise summary of hundreds of thousands of financial transactions it may have entered into over this period. The financial statements that shorten a large company’s operations, financial position and cash flows over a specific period are concise statements based on thousands of financial transactions. Consequently, all accounting designations are the culmination of years of study and rigorous examinations combined with a minimum number of years of practical accounting experience.
Accounting is one of the main function of almost any business. It may be handled by a bookkeeper or an accountant at a small firm, or by substantial finance departments with dozens of employees at larger companies. The reports generated by many streams of accounting, such as cost accounting and management accounting, are invaluable in helping management make informed business decisions. While a bookkeeper can handle basic accounting functions, advanced accounting is typically handled by qualified accountants who possess designations such as Certified Public Accountant, or Chartered Accountant, Certified General Accountant or Certified Management Accountant.
What is Auditing?
Auditing is an objective examination and evaluation of the financial statements of an organization to make sure that the records are a fair and accurate representation of the transactions they claim to represent. Auditing can be conducted internally by employees of the organization, or externally by an outside firm. Auditing performed by outside parties on private companies can be extremely helpful in removing any bias when it comes to the state of a company’s financials. Auditing look for what can be called a “material error” in statements on any particular object. They help give stakeholders with a sense of accuracy when concerning the state of the subject audited and can help enable them to make better, more informed decisions regarding the subject audited. When third parties perform auditing, the opinion on whatever is audited can be candid and honest without it impact daily work relationships.
Almost all companies take an audit once a year, whereas even larger companies can receive audits monthly. For some companies, audits are a legal obligation due to the powerful incentives to intentionally misstate financial information in an attempt to commit fraud. For some public traded companies, auditors are used as a resource to evaluate the effectiveness of internal controls on financial reports.
- Accounting is an art of organized, keeping the records of the monetary transactions and preparation of the financial statements of the company. Auditing is a systematic task which involves the independent evaluation of the financial information to express an opinion on true and fair view.
- Accounting is a streamlined task, which is performed by the Accountants but Auditing is a difficult task, so Auditors are required for performing it.
- The primary purpose of accounting is to reveal the profitability position, financial position, and performance of the organization. Whereas, auditing is to check the correctness of the financial statement.
- Accounting is governed by Accounting Standards, while Standards on Auditing governs Auditing.
- End of Accounting is the beginning of Auditing.
- Accounting is a continuous activity. Unlike Auditing, which is a periodic activity.
Although Accounting requires complete knowledge of the accounting standards, principles, conventions and assumptions as well as Companies Act rules and tax laws. The procedure of auditing conducted only when the accounting is done properly so; it cannot be neglected.