Accounting is keeping records of the financial transactions and preparing financial statements; but auditing is critical examination of the financial statements to give an opinion on their fairness.
Accounting is carried out on continuous basis with daily recording of financial transactions ; while auditing is basically a periodic process and carried out after the preparation of final accounts and financial statements, usually on yearly basis.
Accounting starts usually where book-keeping ends; while auditing always starts where accounting ends. Accounting mainly concentrates on the current financial transactions and activities; while auditing concentrates on the past financial statements. Accounting covers all transactions, records and statements having financial implications; while auditing mainly covers final financial statements and records. Accounting is very detailed and captures all details related to financial transactions, records and statements; while auditing generally uses financial statements and records on sample basis.
Accounting involves checking and verifying details related with all financial statements and records; while auditing may be carried out through test checking or sample checking. The primary focus of accounting is to accurately record and present all financial transactions and statements; while the primary focus of auditing is to verify the accuracy and reliability of the financial statements, and to judge whether the financial statements provide a true picture of the actual financial position of the entity.
Objective of accounting is to determine the financial position, profitability and performance; while objective of auditing is to add credibility to the financial statements and reports of the company. Accounting is governed by Accounting Standards with some degree of discretion; but auditing is governed by Standards on Auditing and does not provide much flexibility.
Accounting is usually carried out by an internal employee of the company; but auditing is carried out by an external person or independent agency. Accountant is appointed by the management of the company; while the auditor is appointed by the shareholders of the company, or a regulator. Any specific qualification is not compulsory for an accountant; but some specific qualification is compulsory for an auditor.
Accounting is carried out by a company employee who gets a salary; while a specific auditing fee is paid to the auditor. The scope of accounting is determined by the management of the company; while the scope of auditing is determined by the relevant laws or regulations.
Accounting is necessary for all organizations in the day-to-day or routine operations; while auditing is not necessary in the day-to-day operations.
Accounting prepares financial statements e. Accounts are submitted to the management of the organization; while audit report is submitted to the shareholders. Accountants may make suggestions for the improvement of accounting and related activities to the management; whereas auditor usually does not make suggestions, except in some cases with specific requirements, e. An Accountant is not usually prosecuted for professional misconduct; whereas an auditor can be prosecuted for professional misconduct as per the applicable legal procedure.
Accountant can be removed by the management; while an auditor can be removed by the shareholders. Accounting and auditing both are important for an organization. Accounting and auditing are carried out separately by internal employees and independent third party respectively. There are many differences between the two. Accounting is continuous; and focuses on accurately recording and preparing all financial transactions and statements.
Auditing is independent; and focuses on critical evaluation of financial statements and providing an unbiased opinion on their accuracy. However, they also complement each other in some respects. Accountants can learn from professional knowledge of an auditor; and implement the best practices in their accounting work. Auditor may get help from the accountants for a thorough knowledge of the accounting system of an organization and technical aspects of the business.
If any fraud or error remains undetected; the auditor will be held responsible solely. Difference between Accounting and Auditing. Difference Between Similar Terms and Objects. MLA 8 Singh, Surendra. Name required. Email required. Please note: comment moderation is enabled and may delay your comment. There is no need to resubmit your comment. Accounting involves the following: Recording entries of income and expense transactions in the books of accounts of an enterprise Recording entries of transactions effecting assets and liabilities of the enterprise in its books of accounts Drawing up detailed financial statements of the enterprise from books of accounts Accounting function can be performed in house by an employed accountant or can be outsourced to an accounting firm.
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Inspecting financial statements to verify whether they show true and fair view. To report financial position of the enterprise.
Performed at specific intervals — quarterly or annually. First step prior to commencement of auditing function. Auditors use past accounting transactions and classifications. They are there to ensure the information is free from material misstatements. They also look at the internal controls of a company. Auditors may test these controls and recommend how they can be improved. After reading this you should have an understanding of the clear difference between accounting and auditing.
To put it simply though accounting is keeping track of financial information while auditing is making sure these financial records are free from material misstatements. Facebook Twitter Linkedin Skype. Definition By definition, accounting is keeping records of financial transactions and preparing the financial statements of the company. Our Low Cost Accounting Solution.
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