Auditing and accounting contribute to being two crucial processes, which are associated with the financial activities as well as records of the business entity.
The crucial difference between Accounting and accounting is that Accounting involves the technique of reporting, maintaining, and recording the financial affairs of the business organization, which depicts the financial status of the company.
Auditing, on the other hand, contributes to being the systematic examination of all the books of the accounts along with the other financial documents of the organization, to gain a prerequisite understanding of whether the statement showcases the real view of the company.
Accounting vs Auditing
Accounting refers to the procedure of maintaining the prerequisite monetary records of a specific organization in a certain way so that they can lead a helping hand for the preparation of different financial statements and which will confer a true and fair view of the organization’s business.
They need to make financial statements, according to the regulatory authority guidelines. On the other hand, auditing contributes to being the assessment of financial statements and records which are prepared via the accounting function.
The ultimate motive is ensuring the reliability of different financial statements.
What is Accounting?
Accounting happens to be a unique language of business, which is essential in understanding the different economic activities of the entity.
It refers to the act of capturing the daily monetary transactions of the business as well as classifying them into different groups. Apart from this, the transactions are known to be summarized in such a manner that they can be found without any hurdles during the emergency, followed by the analysis as well as an understanding of different results of financial statements as well as communicating different results of the various interested parties.
The primary function of accounting is offering material information, primarily of the financial kind, to take the right decision.
The fields of accounting involve Social Responsibility Accounting, Human Resource Accounting, Financial Accounting, Tax Accounting, Management Accounting, and Cost Accounting. The ultimate goals of Accounting include:
1. Keeping proper records via Ledger, Subsidiary Books, Journal, Trial Balance, to name a few.
2. It includes evaluating different results from the specific records which are maintained via the Trading as well as the Profit & Loss Account
3. Conferring the required details, regarding liquidity and solvency position to the necessary parties.
4. Showcasing the financial status of the organization via the Balanced Sheet
What is Auditing?
The Audit contributes to being a methodological process to examine the financial details of the organization to provide the right judgment on the true and fair view.
Auditing contributes to being a vital unbiased investigation of various aspects of the transaction, which includes account books, receipts, vouchers, and different relevant documents for understanding the reliability and validity of the financial statement.
In addition to this, it is possible to detect deliberate manipulation, frauds, and errors in the accounts after undergoing detailed scrutiny. The auditor will be inspecting the transparency and accuracy of the financial details, compliance along with the accounting standards and checking out if the taxes have been paid properly.
After the inspection of financial records and accounting books, the auditor will be delivering a report.
It is possible to conduct the audit both externally and internally. An internal auditor conducts the activities of internal audit for the improvement of the internal accounting system and control systems.
The management of the company appoints the internal auditor whereas the shareholders appoint the External Auditor.
Difference between Accounting vs Auditing
Here is a list of the differences between accounting vs auditing:
1. By definition, accounting refers to the process to maintain the monetary records of the business in a certain way that it is useful for the preparation of financial statements which will confer a true and fair view of the business.
On the other hand, auditing refers to the assessment of the different financial records which are known to be prepared via the accounting function. The ultimate objective is ensuring the dependency on financial statements.
2. The primary categories of accounting include financial accounting, cost accounting, managerial accounting, Government Accounting, Social Benefit Accounting, Human Resource accounting. Auditing, on the other hand, can be subdivided into external auditing and internal auditing.
3. Accounting happens to be an on-going activity where the financial statements are known to be prepared annually and quarterly. Auditing, on the other hand, happens to be a periodic activity where the audit of the different financial statements is done for the majority of the companies. There are a plethora of businesses that are capable of conducting the audit quarterly or annually.
4. Bookkeeping happens to be the starting beginning of the process of accounting. Here, the different financial affairs’ records of the organization are maintained which is used for the preparation of the different financial statements.
Auditing, on the other hand, begins once the work of the accountant is done. As the financial statements have been prepared, the auditor begins after the completion as well as the accuracy of every financial statement has been verified.
5. The accountant happens to be a vital part of the company’s mid-level management. The responsibility includes introducing a true and fair view of the company’s financial position to different stakeholders.
The auditor, whereas, can be external and internal to the business. The internal auditor will be an integral part of the company’s mid-level management. In the case of the external auditors, the business should choose certified auditing firms that have become well renowned in the industry in such a manner that the level of auditor’s responsibility is more, as compared to the accountant.
The reports, they confer, happens to be the certification of all the work, which is accomplished by the accountant.
6. The daily activities of an accountant involve the preparation of different financial statements for the company, maintenance of proper documents, accountants books, business models, projections, to name a few. The everyday activities of auditors are inclusive of preparation of audit reports for different users, verification of different documents for the establishments of the audit trail, to name a few.
A CMA majorly plays the role of an accountant and financial analyst in the industry whereas a CPA is considered worldwide as an expert professional in public accounting and auditing.
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