Mar 15, 2022
The difference between audit and accounting can be summarized as follows:
Purpose and Role
Accounting involves the ongoing process of recording, classifying, summarizing, and managing a company’s financial transactions and preparing financial statements. It provides information on the financial health, profitability, and performance of a business.
Auditing is an independent examination and verification of the financial statements prepared by accounting. It aims to ensure the accuracy, reliability, and compliance of the financial reports with legal and regulatory requirements.
Process Timing
Accounting is a continuous process that happens throughout the financial year.
Auditing is typically conducted periodically, often annually, or at other specified intervals after accounting records are completed.
Responsibilities
Accountants handle the preparation of financial records, including books of accounts, balance sheets, income statements, cash flow statements, and tax filings.
Auditors review these financial records and statements, assess internal controls, detect errors or fraud, and issue an audit report expressing an opinion on the financial statements' fairness and compliance.
Independence
Accountants are usually internal or external professionals preparing the accounts.
Auditors maintain independence and neutrality from the company to provide an unbiased assessment.
Deliverable
Accounting delivers financial statements and reports used by management and stakeholders for decision-making.
Auditing delivers an audit report that provides assurance to stakeholders like investors, regulators, and creditors on the financial statements' accuracy and transparency.
Here is a clear comparison table highlighting the key differences between accounting and auditing:
Aspect | Accounting | Auditing |
Definition | Process of recording, classifying, summarizing, and interpreting financial transactions and preparing financial statements. | Independent examination and verification of financial statements for accuracy and compliance. |
Purpose | To provide information on the financial position, performance, and profitability of a business. | To verify the accuracy and fairness of the financial statements prepared by accounting. |
Timing | Continuous process throughout the financial year. | Performed periodically, often annually, after accounting is completed. |
Responsible Person | Accountants (internal or external employees). | Auditors (external and independent professionals). |
Independence | Accountants are part of the organization or engaged by it. | Auditors maintain independence to provide an unbiased opinion. |
Scope | Covers all financial records, transactions, and reporting. | Focuses on final accounts and selected transactions to verify accuracy. |
Standards | Governed by Accounting Standards. | Governed by Standards on Auditing. |
Objective | To track financial activities and prepare financial reports for decision-making. | To provide assurance about the true and fair view of financial statements. |
Deliverables | Financial statements like income statement, balance sheet, and cash flow statement. | Audit report expressing opinion on financial statements. |
Reporting to | Management of the company. | Shareholders and regulatory authorities. |
To sum up succinctly: accounting sets up and manages the financial data of a company, while auditing verifies and gives assurance that this financial data is accurate and follows required standards and regulations. Both functions are essential for good financial governance and business credibility.
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