In today's post, we will know what is Accounting and Auditing and what is the difference between Accounting and Auditing.
What are the differences between Accounting and Auditing?
Accounting is known as the process of recording, classifying, summarizing, and interpreting financial transactions and statements in order to determine the financial position of an organization. Accounting is also known as the specific language of business.
On the other hand, auditing is referred to as the process of examining financial records such as transactions and statements of an organization to detect any discrepancies during the process of recording the transactions and to verify the accuracy of the records.
An audit can be of two types, internal and external audit. An internal audit is done by an internal auditor while an external audit is done by auditors who are hired from outside. They are generally appointed by the shareholders for the purpose of auditing the accounts of the organization.
There are some important differences between Accounting and Auditing, which we will understand below through the Difference Table, but before that, we understand better what is Auditing of Accounting.
What is Accounting?
Accounting is a specialized language of business, which helps in understanding the economic activities of the organization. It is an act of systematically capturing the day-to-day monetary transactions of the business and classifying them into different groups.
Transactions in accounting are summarized in such a way that they can be easily referred to at the time of urgency, followed by analysis and understanding.
Accounting is also known as the language of business because every business is measured in terms of some digits or numbers and these numbers are prepared through accounting.
What is Auditing?
An audit is a systematic process of independently examining the financial information of an entity for the purpose of giving an opinion on a true and fair view. The organization here refers to all entities, irrespective of their size, structure, nature, and form.
Auditing is a critical, unbiased investigation of each aspect of a transaction, i.e., verification of vouchers, receipts, ledgers, and related documents to ascertain the validity and reliability of financial statements.
Further, errors and frauds or willful manipulation or misappropriation of accounts, etc. can also be detected through detailed investigation.
The auditor will inspect the accuracy and transparency of financial information, compliance with accounting standards, and whether taxes have been paid properly. After a complete inspection of the accounting books and financial records, he will give an opinion in the form of a report.
Reporting on a true and fair view shall be made to the person who appoints the auditor. There are two types of audit reports, they are:
Audits can be conducted internally and externally. An internal audit is performed by an internal auditor who is appointed by the management of the organization to improve its internal control system and accounting system. The external auditor is appointed by the shareholders of the company.
Difference Between Accounting and Auditing
So far we have known what is Accounting and Auditing, if you have read all the above things carefully, then you must have come to know about the difference between Accounting and Auditing.
If you still have any confusion about understanding what is Accounting and Auditing and what is the difference between them, then now we are going to tell you some important differences between them below.