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What is the difference between auditing and accounting?
Auditing is a branch of accounting. While accounting involves recording all of the financial transactions of a particular company, auditing is the activity of reviewing these financial transactions to see if the company’s internal controls are in compliance with the regulations and laws. Internal controls refer to the procedures that a company has put in place to ensure that its finances are correct and reliable. This shows efficiency in their daily operations.
Although there are similarities between auditing and accounting, such as their role in ensuring that a company’s finances are accurate to prevent fraud, they are actually two very different activities.
Here is a breakdown of how auditing and accounting differ from each other:
As explained above the purpose of accounting is to understand a company’s financial position to know how well it is operating by gathering its financial statements and compiling them into a report for the company’s management to review. They also have various other duties including preparing tax returns and the payroll, among other activities.
Auditing, on the other hand, is going through the financial statements provided by the accountant to see if all of the transactions are correct and honest. This is to make sure that the company is not going against federal laws, or committing fraud.
Accounting is a daily and continuous process. Every time a financial transaction is exchanged, it is to be recorded by the accountant as part of monitoring and maintaining the company’s cash flow.
In contrast, auditing is only conducted periodically, when the accountants have completed their tasks; auditing usually comes after accounting.
Accountants are professionals hired within the company, and are a necessity. Auditors, however, are usually third party individuals who have no connection with the company. If the company is small, internal staff can be trained to conduct internal auditing. Otherwise, most companies enlist the help of external corporate audit firms.
In addition, both accountants and auditors follow different standards and regulations when they work.
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