Major difference between accounting and auditing process

Major difference between accounting and auditing process

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Exam Preparation
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Created By Admin Last Updated Tue, 08-Dec-2020

Both accounting and auditing plays a major role in handling and running a business. Both the processes have their important separate role in managing and analyzing the company’s account related activities. The key difference between both the process lies in the fact that -Accounting means to maintain the financial statement of a company while the Auditing means to check whether the financial statements maintained by the company are accurate or not. Let’s understand their difference and meaning one by one.

Accounting: -

·         Refers to the process of recording, classifying, summarizing and interpreting the financial transactions of a company.

·         The aim of accountancy is to find out the profit earned and the loss that company suffered. It shows the financial condition of a company under a specific period of time.

·         Accounting is categorized in various branches like cost accounting, management accounting, financial accounting etc.

·         Talking about the nature of employment in accounting, the accountants are permanent employee there.

·         In case of the accountants’ qualification, there is no requirement for any formal qualification.

·         Accountancy starts where the book keeping ends and the accountants here are not required to submit the report on financial statements that is prepared by them.

·         An accountant is remunerated in form of salary that is fixed by the management.

Auditing: -

·         Refers to the process of examining the books of accounts and reporting on the financial statements that are made under the accounting.

·         It aims in examining the correctness of accounts and the financial statements made by the accountants. Then the auditors certify that whether the company exhibits a true and fair view.

·         Auditing has two main categories- internal audit (carried out by internal auditor usually an employee) and external audit (carried out by external auditor, appointed by the shareholders).

·         The nature of employment in auditing is independent based on the auditor and is not a permanent employee of a company as in case of accountancy.

·         The qualification here required is of a qualified CA from a reputed institute certified by the ICAI.

·         Auditing starts where the accountancy ends and auditors have to submit the report that certifies the truth and fairness of financial statements made by an accountant of a company.

·         An auditor is remunerated in the form of professional fees that is fixed by shareholders.

By knowing their basic differences, we can conclude that both the fields have their own importance for an organization. Accounting is necessary for all organizations and companies in the day to day operations while auditing is required in knowing the reports of that company that how much fair and true work these companies are performing. Apart from the differences between both the fields, they can complement each other by learning and sharing knowledge.