Accounting and auditing are also financial concepts. Despite their similarity and distinctions, both words cannot be used interchangeably. Accounting and auditing are also critical corporate practises.
The auditing process comes after the accounting process. Accounting is used by organizations to make the records of their all-monetary transactions. Accounting is a critical step in industry and it serves as the foundation for the financial statements that are prepared at the end of each financial year.
Auditing, on the other hand, is undertaken to review and analyse accounts and see if there are any in the accounting books. As a result, the auditing process guarantees whether or not the evidence is accurate and genuine.
What is Accounting?
Accounting's role is to keep track of an organization's day-to-day financial transactions, register them, and produce a report.
Accounting is referred to as financial language because it assists managers with understanding the financial transactions that occur in an organization. An organization's accounting process is focused on general accounting rules and Generally Accepted Accounting Principles (GAAP).
There are various sheets to administer bookkeeping measures in associations. For instance, in the United States of America, the Governmental Accounting Standard Board (GASB) and Financial Accounting Standard Board (FASB) administers all the bookkeeping exercises associations.
All monetary exchanges in an association are recorded in such a way so they can be handily alluded to at whatever point they need to emerge. The data gets by bookkeeping measures is useful in settling on a significant choice identified with the association.
For instance, the administration of an association can take the choice to put resources into the creation of a specific item by alluding to the profit/loss statement.
There are various fields in accounting, which are Financial accounting, Tax accounting, Management accounting, Cost accounting, social responsibility accounting, and Human resource accounting.
What is Auditing?
All statements made during the accounting process are reviewed, analyzed, and validated during auditing process. Accounting records detail the day-to-day financial activities that occur in a company.
The auditing process determines whether or not the information recorded in the records is correct.
An organization's shareholders perform the auditing. The final report of the auditing report indicates whether or not the organization's financial records were correct.
Auditing is a systematic method of reviewing even the smallest company, such as receipts, vouchers, accounting statements, and other financial records and the facts reported in financial reports, and all the information gathered by examining all organizations is compared, and the findings of the whole process are registered in the auditing report, which is subsequently addressed to the organization's shareholders.
The thorough inspection will spot both misconceptions, inconsistencies, and incorrect facts in the papers. In addition, the auditor will determine whether or not the taxes were collected on schedule and correctly.
Auditing can be of two types:
1) External Auditing:
External auditing is carried out by auditors from outside agencies. External auditing is done to meet the constitutional provisions of a country's auditing rules.
In most nations, it is the rule that all companies shall have external audits performed on an annual basis.
So that the financial statements made public by companies for the benefit of taxpayers and shareholders can be trusted. However, due to suspicions of bribery, several companies perform external auditing in accordance with court orders.
2) Internal Auditing:
The organization's management requests that internal auditing be conducted. It is carried out by an organization's workers. Internal auditing is performed to learn about the different procedures that take place in the enterprise as well as the potential risks associated with each procedure.
To summarise, accounting and auditing are also critical organizational procedures. The roles of auditors and accountants are important for all organizations.
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