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Difference Between Accounting and Auditing

Accounting involves regularly recording financial transactions and preparing financial statements, while auditing critically examines completed financial statements on a periodic basis to give an opinion on their accuracy. The key differences are that accounting focuses on ongoing record keeping, has more detail, and reports internally, whereas auditing examines past statements at a higher level periodically and reports externally on their reliability.

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3K views

Difference Between Accounting and Auditing

Accounting involves regularly recording financial transactions and preparing financial statements, while auditing critically examines completed financial statements on a periodic basis to give an opinion on their accuracy. The key differences are that accounting focuses on ongoing record keeping, has more detail, and reports internally, whereas auditing examines past statements at a higher level periodically and reports externally on their reliability.

Uploaded by

aamir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Difference between

Accounting and Auditing:


In terms of

 Definition:

Accounting is keeping records of the financial transactions and


preparing financial statements; but auditing is critical
examination of the financial statements to give an opinion on
their fairness.
 Timing:
Accounting is carried out on continuous basis with daily recording
of financial transactions; while auditing is basically a periodic
process and carried out after the preparation of final accounts and
financial statements, usually on yearly basis.
 Beginning:

Accounting starts usually where book-keeping ends; while


auditing always starts where accounting ends.
 Period:

Accounting mainly concentrates on the current financial


transactions and activities; while auditing concentrates on the
past financial statements.
 Coverage:
Accounting covers all transactions, records and statements having
financial implications; while auditing mainly covers final financial
statements and records.
 Level of Detail:

Accounting is very detailed and captures all details related to


financial transactions, records and statements; while auditing
generally uses financial statements and records on sample basis.
 Type of Checking:

Accounting involves checking and verifying details related with all


financial statements and records; while auditing may be carried
out through test checking or sample checking.
 Focus:

The primary focus of accounting is to accurately record and


present all financial transactions and statements; while the
primary focus of auditing is to verify the accuracy and reliability of
the financial statements, and to judge whether the financial
statements provide a true picture of the actual financial position
of the entity.
 Objective:

Objective of accounting is to determine the financial position,


profitability and performance; while objective of auditing is to add
credibility to the financial statements and reports of the company.
 Legal Status:
Accounting is governed by Accounting Standards with some
degree of discretion; but auditing is governed by Standards on
Auditing and does not provide much flexibility.
 Performed by:

accounting is performed by accountants; while auditing is


performed generally by qualified auditors.
 Status:

Accounting is usually carried out by an internal employee of the


company; but auditing is carried out by an external person or
independent agency.
 Appointment:

Accountant is appointed by the management of the company;


while the auditor is appointed by the shareholders of the
company, or a regulator.
 Qualification:

Any specific qualification is not compulsory for an accountant; but


some specific qualification is compulsory for an auditor.
 Remuneration Type:

Accounting is carried out by a company employee who gets a


salary; while a specific auditing fee is paid to the auditor.
 Remuneration Fixation:
Accountant’s remuneration, i.e., salary is fixed by the
management; while auditor’s fee is fixed by the shareholders.
 Scope Determination:

The scope of accounting is determined by the management of the


company; while the scope of auditing is determined by the
relevant laws or regulations.
 Necessity:

Accounting is necessary for all organizations in the day-to-day or


routine operations; while auditing is not necessary in the day-to-
day operations.
 Deliverables:

Accounting prepares financial statements e.g. Income Statement


or P/L, Balance Sheet, Cash Flow Statement, etc.; while auditing
provides Audit Report.
 Report Submission:

Accounts are submitted to the management of the organization;


while audit report is submitted to the shareholders.
 Guidance:

Accountants may make suggestions for the improvement of


accounting and related activities to the management; whereas
auditor usually does not make suggestions, except in some cases
with specific requirements, e.g. improvement in internal controls.
 Liability:

Accountant’s liability generally ends with the preparation of the


accounts; while auditor has liability after preparation and
submission of the audit report.
 Shareholders’ Meetings:
Accountant does not attend the shareholders’ meeting; while an
auditor may attend the shareholders’ meeting.
 Professional Misconduct:
An Accountant is not usually prosecuted for professional
misconduct; whereas an auditor can be prosecuted for
professional misconduct as per the applicable legal procedure.
 Removal:

Accountant can be removed by the management; while an auditor


can be removed by the shareholders.

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