Accounting:
Accounting is the process of capturing, classifying, summarising, analysing, and presenting an organization's or entity's financial transactions, records, statements, profitability, and financial condition. Accounting is a specialised business language.
Auditing:
The critical inspection of a business's or organization's financial records or statements is referred to as auditing. It is a legal requirement for all distinct legal entities. After the financial statements and accounts have been finalised, auditing takes place.
Difference between Accounting and Auditing
| Basis | Accounting | Auditing |
|---|---|---|
| Purpose | Accounting deals with the preparation of financial statements. | The purpose of auditing is to ensure that financial statements are accurate. |
| Goal | Accounting's goal is to display performance and financial statements. | The goal of auditing is to confirm that financial statements are true and fair. |
| Nature | Accounting is concerned with the most up-to-date information. | Past data is the subject of auditing. It is due to their analytical temperament. |
| knowledge | Accounting work necessitates accounting knowledge on the part of the accountant. | Auditing job necessitated an auditor's expertise of both accounting and auditing. |
| Employment | An accountant is a full-time employee of the company. | The auditor is a self-employed individual. |
| Beginning | When the auditor's task is completed, the accountant's work begins. | When an accountant's job is finished, an auditor's job begins. |
| Qualification | According to the legislation, an accountant cannot be a Chartered Accountant. | For public corporations, an auditor must be a Chartered Accountant. |
| Standards | Going concern, accrual consistency and prudence are among the accounting principles. | Independence, objectivity, full transparency, and materiality are among the auditing principles. |
| Methods | Depreciation, amortisation, and value are examples of accounting methods. | Manual and digital auditing methods are available. |
| Techniques | Depreciation rate, interest rate, and instalment payment are all accounting techniques. | Vouching, verification, and valuation are all techniques used in auditing. |
| Rules | Accounting is not governed by any institute-issued code of conduct. | The institute of chartered accountants has established a code of conduct for auditing. |
| Necessity | Accounting is a must-have for any organisation, large or small. | Every business does not require auditing. |
| Report | There is no requirement for any accounting work to be reported to anyone. | Separate reports to shareholders, directors, or owners are required for the auditing work. |
Conclusion
Accounting and auditing are linked and support one another. The accountant's work is backed up by the auditor's approval. If the organization's core accounting framework is not developed, the auditor's task will be meaningless.
Also, the two can collaborate, particularly when it comes to establishing organisational processes. The auditor can test the controls that the accountant created and executed. Internal controls are established jointly by accountants and auditors and are normally accepted by management. They can be as simple as a manual maker-checker system, in which a maker prepares a document and submits it to a superior for approval.