Difference Between Accounting And Auditing

The main difference between accounting and auditing is that accounting is the process of recording and summarizing financial transactions, while auditing is about verifying the accuracy and completeness of financial statements. The article discusses what are accounting and auditing and talks about the key difference between accounting and auditing.

Content

• What is Accounting?
• What is an Audit?
• Main Differences Between Accounting And Auditing
• Conclusion

Accounting refers to keeping up-to-date records of every financial transaction, while auditing is when the financial statements prepared under the accounting process are analyzed and evaluated to verify whether they are correct. In addition, steps are taken in the audit to decide whether these financial statements are prepared per the legal and reporting framework specifically defined for preparing financial statement presentations.

Accounting vs Auditing - Tabular Comparison

The critical differences between accounting and auditing are as follows –

What is Accounting?

Accounting is a specialized business language that helps understand an entity’s economic activities. It captures and categorises a company’s daily monetary transactions into different groups. With that, transactions are summarized to be easily viewed in an emergency and then analyzed and understood. Financial statements and finally communicate the results to the interested parties.

The primary task of accounting is to provide helpful financial information for the organization and management. Cost accounting, management accounting, tax accounting, financial accounting, human resources accounting, and social responsibility accounting are the areas of accounting.

What is an Audit?

An audit is a systematic procedure intended to independently examine an entity’s financial information to express an opinion on its accuracy. The organization refers to all entities regardless of size, structure, nature, and form. It is a material and objective investigation of all aspects of a transaction. That is, financial statements, vouchers, receipts, accounting records, and related documents are examined to discover the validity and reliability of the financial statements. In addition, errors, fraud, intentional manipulation, usurpation of accounts, etc. They can also be detected by close inspection.

Main Differences Between Accounting And Auditing

Let us understand the differences between accounting and auditing in detail –

• Accounting is keeping records of financial transactions and preparing financial statements, whereas auditing is a critical examination of financial statements to give an opinion on their fairness.
• Accounting is a day-to-day task of a business, including the daily recording of financial transactions. At the same time, auditing is a systematic process after preparing final accounts and financial statements, usually annually.
• Accounting primarily focuses on current financial transactions and activities, while auditing focuses on past financial statements.
• Accounting covers all transactions, records, and statements that have financial implications, whereas auditing mainly covers final financial statements and records.
• Accounting is very detailed and captures all the details related to financial transactions, records, and account statements, whereas auditing generally uses financial statements and records on a sample basis.

• Accounting focuses on recording and presenting all financial statements and transactions. In contrast, auditing focuses on verifying the accuracy of the financial statements and judging if the financial statements genuinely represent the financial position of a business.
• Accounting determines a company’s financial position, profitability, and performance, while auditing aims to add credibility to the company’s financial statements and reports.
• Accountants do accounting, and qualified auditors usually do auditing.
• A company employee usually performs accounting tasks, while an external person or agency audits.
• The company’s management appoints the accountant, whereas the auditor is appointed by the company’s shareholders or a regulator.
• The accountant’s salary is set by management, while the shareholders set the auditor’s fee.

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Conclusion

Both accounting and auditing are essential and fundamental for every organization and play a decisive role. However, the scope of auditing is broader than accounting. It requires in-depth knowledge of tax laws and regulations, accounting and auditing standards, and good communication skills.

In addition, confidentiality, integrity, honesty, and independence must be observed in audit procedures. The reports presented by the auditors benefit the users of the financial statements, such as creditors, shareholders, investors, suppliers, debtors, clients, governments, etc., to make reasonable decisions.

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