If you’re interested in the world of finance and business, you might have come across the terms ‘accounting‘ and ‘auditing.’ While the two may seem similar on the surface, they are vastly different fields that require different skills and knowledge.
In this article, we will explore and highlight the main differences between accounting and auditing
What is Accounting?
Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that can be used for decision-making purposes.
It involves the preparation of financial statements, such as balance sheets, income statements, and cash flow statements, that reflect the financial position and performance of a business.
What is Auditing?
Auditing, on the other hand, is the process of examining financial statements and other financial information to determine whether they are accurate, complete, and comply with accounting standards and principles.
The purpose of auditing is to provide assurance to stakeholders that the financial statements are reliable and can be used for decision-making purposes.
Main Difference between Accounting and Auditing:
1. Purpose:
The main difference between accounting and auditing is their purpose. Accounting is primarily concerned with the preparation, presentation, and analysis of financial information.
This includes recording transactions, creating financial statements, and providing insights into the financial performance of an organization.
In contrast, the purpose of auditing is to provide an independent assessment of the financial statements and internal controls of an organization.
2. Scope:
The scope of accounting and auditing also differs. Accounting covers a broad range of financial activities, including bookkeeping, financial reporting, tax planning, and analysis.
It may also involve non-financial activities such as budgeting and strategic planning. On the other hand, auditing focuses specifically on reviewing financial statements and internal controls.
This includes testing transactions, verifying account balances, and assessing the overall reliability of the financial information presented.
3. Objectivity:
Accountants work for the company they are recording transactions for and are expected to maintain a level of objectivity.
Auditors, on the other hand, are independent third-party professionals hired to provide an unbiased assessment of a company’s financial statements and internal controls.
4. Timeframe:
Another main difference between accounting and auditing is that accounting is an ongoing process that is performed regularly, while auditing is a periodic process that is performed annually or quarterly.
Accounting is necessary for the day-to-day operation of a business, while auditing is necessary to provide assurance to stakeholders that the financial statements are reliable.
5. Reporting:
Finally, the reporting requirements for accounting and auditing also differ. Accountants are responsible for preparing statements and other reports that provide insights into the financial performance of an organization.
These reports may be used by stakeholders such as investors, lenders, and regulators to make informed decisions. Auditors, on the other hand, are responsible for providing an independent assessment of the financial statements and internal controls of an organization.
Their report provides assurance to stakeholders that the financial statements are trustable and accurate.
In summary, accounting and auditing are two crucial functions that are essential for the smooth operation of any business.
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Hire Meru Accounting’s team to get the best financial advice on accounting and auditing services for your business.
FAQs
- What is the main goal of accounting?
The goal of accounting is to track and report all money-related activity for a business. - What does an audit do for a company?
An audit checks if financial reports are correct and follow standard rules. - How are auditors and accountants different in their roles?
Accountants work inside the company while auditors review the records as outside experts. - What does accounting include besides reports?
It also includes tax planning, budget tracking, and keeping daily records of money flow. - How often is auditing done compared to accounting?
Auditing is done once a year or quarter, while accounting is done every day or month. - What kind of reports do auditors prepare?
Auditors prepare a report that shows if the financial records can be trusted. - Why must auditors stay independent?
They must stay free from bias so their review is fair and based only on facts. - How does accounting help in making business choices?
It gives clear records that show how the business is doing and where money is going.
