Accounting and auditing are both things related to money and finance, but they are different. Accounting is about managing and reporting money records. Auditing is about checking that the records we keep are accurate.
Accounting is the process that provides data to management, IRS, and the investors by describing the business activities for reporting their economic performance. People use it as a tool to know how well they are accomplishing their goals.
On the other hand, auditing is verifying that the information provided in an account book is according to the accepted principle of recording transactions. Auditing refers to the independent assessment of financial statements by professional accountants who confirm that these reports represent a true and fair view of the company's financial situation. Let us study both Accounting vs Auditing in detail below:
Comparison Chart
The basis for Comparison Accounting Audit Meaning The recorded financial transactions are available at cost, historically or above historical value. In addition to the recorded financial transactions, some additional procedures are performed on a regular basis. Nature Activities of providing information about the business activities Financial transactions that have taken place Scope Recordkeeping and reporting process Auditing process Documents or Processes Accounting records Audit work papers Purpose To provide data about economic performance To confirm the truthfulness of financial report on part of management
Definition of Accounting:
Accounting can be defined as a tool that is used for measuring, analyzing, and reporting the financial information of an organization. It consists of three main areas including accounting concepts, accounting principles, and guidelines it. In short, we can say that this is a process where the business transactions are recorded according to set guidelines so as to make certain that they do not misrepresent the actual financial position of the company. If we go by an earlier definition then accounting is like a system to gather and provide all financial transactions in the form of detailed statements and reports for easy reference.
Definition of Auditing:
Auditing can be defined as an independent examination and evaluation of business activities, data, and other information in order to make sure that these accounts or records are accepted principles like consistency, accuracy, reliability, compliance with laws, etc. Auditors are professionals who have expertise on accounting principles so they conduct their work on behalf of third parties i.e. user outside organization that requires their financial records are authenticated properly so assessment whether they are true/fair view or not? It is done via observation asking questions, comparing documents, etc.
Also check: Limitations of Accounting
Key Differences Between Accounting vs Auditing:
After going through both definitions of Accounting and Auditing, it is necessary to highlight the key differences between Accounting vs Auditing in order to get an idea about them. These are given as under:
- According to accounting principles one records business transactions but on the other hand, auditors verify that financial reports represent true and fair views.
- Accounting can be defined as a system that gathers all financial transactions for easy reference while auditing refers to an independent examination of business activities in accordance to set guidelines so that they do not misrepresent the actual financial position of a company.
- The scope of accounting includes recordkeeping and reporting process while the scope of auditing process mainly covers verifying truthfulness financial report or audit work papers.
- Accounting provides data about economic performance while auditing confirms the truthfulness of financial reports or work papers provided by management.
- Accounting transactions are recorded according to set guidelines and accepted principles like consistency, accuracy, reliability, etc. while audit transactions contain additional procedures performed on a regular basis which could include observation asking questions, comparing documents, etc.
- According to accounting principles, we can say that this is a process where the business transactions are recorded whereas auditors verify that these reports represent true and fair views. It is the responsibility of management to provide proper information but on the other hand, it is the responsibility of auditors to check whether they are correct or not so as to be acceptable by stakeholders without any objections.
Conclusion:
In conclusion, we can say that both Accounting vs Auditing plays a vital role in any organization that is why we can say that without accounting we cannot do anything, and also without auditing, we cannot be able to assess the financial status of a company.