Question

One of your friends who has not studied auditing tells you that accounting and auditing are the same as they all involve financial statements and accounting standards. Please explain to him based on your understanding in this unit.

Answer 1

Answer to the question is as under:

Overview of what accouting means

Accounting is a specialised language of business, which helps to understand the economic activities of the entity. It is an act of orderly capturing the day to day monetary transactions of the business and classifying them into various groups along with that, the transactions are summarized in a way that they can be easily referred at the time of urgency, thereafter analyzing and understanding the results of the financial statement and finally communicating the results to the interested parties.

Overview of what auditing means:

The audit is a methodical procedure of independently examining the financial information of an entity with the aim of giving an opinion on true and fair view. Here organisation refers to all the entities, regardless of their size, structure, nature and form.

Auditing is a critical, unbiased investigation of each and every aspect of the transaction, i.e. vouchers, receipts, account books and related documents are verified, in order to spot the validity and reliability of the financial statement. Moreover, errors and frauds or deliberate manipulation in accounts or misappropriation etc. can also be detected through detailed scrutiny.

Key Differences are as under:

BASIS FOR COMPARISON	ACCOUNTING	AUDITING
Meaning	Accounting means systematically keeping the records of the accounts of an organization and preparation of financial statements at the end of the financial year.	Auditing means inspection of the books of account and financial statements of an organization.
Governed By	Accounting Standards	Standards on Auditing
Work performed by	Accountant	Auditor
Purpose	To show the performance, profitability and financial position of an organization.	To reveal the fact, that to which extent financial statement of an organization gives true and fair view.
Start	Accounting starts where bookkeeping ends.	Auditing starts where accounting ends.
Period	Accounting is a continuous process, i.e. day to day recording of transactions are done.	Auditing is a periodic process.

From these we can conclude that accouting & auditing both are different & seperate roles are assigned to them.