The accountants and auditors look after the firm’s financial accounts, maintain a track record of all the finances, and keep them updated. These economic declarations, which include the balance sheet, income statement, and statement of cash flows, are prepared by accountants.
Aside from that, an accountant may be reliable for various other tasks, including bookkeeping, keeping track of expenses and payments, estimating future earnings and cash outgoing, and tax trials.
The accountant can work in both ways, either being a full-time employee or helping another firm manage its finances and prepare for tax-related purposes.
Accounting vs Auditing
The main difference between accounting and auditing is that accounting is analysing, classifying, summarising, and keeping records of transactions of an organisation or an entity, on the other hand, auditing is examining the financial records of the organisation or any person. It is necessary for legal purposes.
Accounting is done to demonstrate the financial transactions related to the company’s or an individual’s day-to-day activities. They are in summarised form, so it is easy to refer to and under the financial statements during the requirement.
Auditing is a step-by-step procedure of unassisted examination or analysis of the financial information of any firm or an individual and making a statement that is free from biases and has valid data as it is necessary for legal matters.
Comparison Table Between Accounting and Auditing
|Parameters of comparison||Accounting||Auditing|
|Definition||Accounting is the arrangement of the organisation’s financial records to keep track of profits and taxes paid.||Auditing is the inspection of the financial documents submitted by the organisation and making it error-free.|
|Goal||The main goal of doing accounting is to understand the gains and losses of the company.||The auditing is done to correct the company’s financial records and issue them an accurate, unbiased report.|
|Key deliverables||Income Statement, tax paid, cash flows, etc.||Audit report.|
|Performed by||It is performed by an accountant.||It is performed by an auditor.|
|Governed by||Accounting Standards||Standards on auditing|
|Duration||Accounting is done from time to time to keep records of their monetary transactions hassle-free at the time of requirement.||Auditing is an infrequent event and it is done by the end of the year mainly to verify the monetary track records of the company.|
What is Accounting?
Accounting is commonly used in business, and it helps maintain an organisation’s or any individual’s financial activities. It is done by classifying and analyzing transactions in various other categories, making it very manageable at the time of urgency.
Therefore, it is essential to understand the financial assertion before conveying it to interested people.
Accounting’s principal purpose is to offer important information, particularly financial details, for the conclusion. Accounting areas include cost accounting, management accounting, tax accounting, financial accounting, human resource accounting, and social responsibility accounting. The primary goals of accounting are mentioned below:
- Bulletin, subsidiary books, and trial balances are all managed to keep factual records.
- Calculation of the outcomes based on the data kept by Trading and Profit & Loss Account.
- The balance sheet is used to demonstrate the company’s financial situation.
- The interested parties also want to know about solvency and liquidity-related information about the company.
What is Auditing?
Auditing is a systemic approach to making financial statements about the company’s monetary transactions or an entity. The statements released in auditing are authentic and free from any false plays. They have a legal role and are mandatory for all companies or organisations to do auditing to keep a record of their finances.
Auditing is a thorough, nonpartisan examination of all aspects of transactions, including coupons, invoices, accounting records, and relevant documents, to decide the monetary statement’s legitimacy and credibility.
Furthermore, a thorough examination might reveal fraudulent practices and willful account tampering, misuse, and so on.
The auditors will evaluate the financial records for correctness and openness, as well as conformity with reporting standards and whether or not taxation has been appropriately paid.
The person who appoints the auditor receives a report on the accurate and fair view. The following are the two types of audit reports:
- The auditor gives the financial report, which is authentic, to the person who has appointed the auditor to do the auditing, which also helps in legal formalities.
- The auditing can be done in two ways: internal and external. The company’s management team conducts internal auditing to analyse finances. At the same time, external auditing is carried out by the company’s stakeholders.
Main Differences Between Accounting and Auditing
- Accounting is done to keep the records of the organisation’s monetary transactions for the requisite period, and the company itself does it by analysing the financial system. In contrast, auditing is done in an analytical manner that issues a valid statement regarding transactions of the organisation.
- Accounting is way too simple than auditing as accountants do it, and they keep the primary required data about finances. While auditing is done by auditors specialising in this field, auditing is a complex procedure.
- Accounting is done to keep an eye on the profits and losses of the company by analysing and maintaining the records, and auditing is done to validate the financial statements or documents formed by the company.
- Accounting can be done anytime according to the organisation’s needs, whereas auditing is occasional.
- Accounting is performed to maintain track of the organisation’s transactions and may have errors, while auditing is accurate with all facts and used in legal procedures.
Accounting and auditing are professional disciplines, but auditing has a broader scope than accounting because it requires a complete study of numerous legislation, tax regulations, accounting principles, reporting standards, and language skills.
Besides, the key characteristics that must be followed while completing the auditing are secrecy, morality, sincerity, and impartiality. The examiner’s reports assist financial information like lenders, stakeholders, investors, vendors, borrowers, customers, authorities, and others in making reasonable decisions.
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