Accounting and auditing are two jobs to look into if you want to work in the financial sphere. Both are critical in maintaining a company’s financial health. Accountants and auditors have different aims and responsibilities, even though they sometimes collaborate. In this article, we define accounting and auditing, outline the abilities that each role requires, and compare and contrast the two crucial functions.
What is accounting, exactly?
Accounting is the process of keeping track of a company’s assets, obligations, and cash flow over time. Accountants are in charge of assessing financial data, providing fiscal advice, forecasting financial results, developing various financial models based on changing conditions, and completing fiscal transactions in accordance with financial rules, regulations, and laws. An accountant’s responsibilities include:
- Expense analysis
- Financial statement preparation
- ensuring that tax laws and other rules are followed
- Returns to the IRS
- Predicting the effects of fiscal decisions
- Providing financial management advice
- Maintaining updated tax law and procedural knowledge
- Suggestions for cost-cutting
Accountants deliver the following reports to businesses:
- Costs of doing business on a monthly, quarterly, and annual basis
- Statements of Profit and Loss
- Profit and loss percentage as a percentage of total sales
- Comparisons of monthly, quarterly, and annual cost savings
- Employees currently on the job
- Margin of profit
- Over time, the company has grown.
- The company’s total market share
What exactly is auditing?
The review of a company’s financial records on a regular basis to detect anomalies and non-compliant activities is known as auditing. Auditors analyse financial reports once an accountant has completed their task. External audits are conducted by third parties; internal audits are conducted by internal auditors within a business; and Internal Revenue Service (IRS) audits are conducted by the IRS. The work product of an auditor focuses on:
- • Legal compliance with industry standards and requirements
- Efficiency of accounting system
- Detection and prevention of fraud
- Accuracy in planning and budgeting
Accounting and auditing standards
Both accountants and auditors follow two sets of rules. The techniques that corporations in the United States employ to compare financial outcomes are known as Generally Accepted Accounting Principles (GAAP). The International Financial Reporting Standards (IFRS) are a collection of international accounting rules that help organisations around the world coordinate their accounting and auditing procedures.
Accounting and auditing have certain similarities
A bachelor’s degree is usually the minimal educational qualification for accountants and auditors, however it is not formally required. Most accountants and auditors will choose to become a Certified Public Accountant as their careers advance (CPA). To prepare for their qualifying exam, CPAs must complete around 150 hours of postsecondary education. Before recruiting accounting and auditing workers, many large organizations prefer that they be eligible for the CPA exam or have already taken and passed it.
The following abilities are shared by successful accountants and auditors:
- Accountants and auditors must be able to write reports that are well written, accurate, and simple to comprehend.
- Accountants must be able to focus on the details that make up a company’s complete financial picture and keep comprehensive records in order to make useful business advice. Auditors must be able to follow each step of the accounting process in order to uncover any irregularities, whether they are unintentional or deliberate.
- Math: Accountants and auditors must be able to perform a wide range of mathematical calculations, from simple to complicated.
- Accountants and auditors must be able to organise the information they get from others and the information they report out in order to develop and check the accuracy of financial reports.
- Accountants and auditors must be computer literate in order to keep up with the tools and apps that organisations use to report and analyse data.
- Accountants use problem-solving skills to solve problems.
- books balancing Auditors employ these abilities when looking into discrepancies and checking completed accounting work.
Accounting and auditing are two different thing
Although accountants and auditors have comparable backgrounds and skill sets, their duties are very different. Here are the main distinctions between them, organised by category:
The main purpose
Auditing examines accounting’s financial records and statements.
Accounting is responsible for a company’s financial records.
Auditing confirms the dependability of a company’s financial records, whereas accounting gives a true and accurate perspective of those data.
Financial accounting, managerial accounting, cost accounting, social benefit accounting, government accounting, and human resources accounting are all types of accounting. Auditing might be internal or external, as previously indicated.Management frequently requests internal auditing to aid with process improvement. External auditing is typically performed as a regulatory review to guarantee that fiscal laws and regulations are being followed.
Accountants prepare financial statements that detail the many outcomes of monetary transactions. Audit reports are classified as “unqualified” or “qualified” by auditors. If the accountant fails to give sufficient information, an auditor will notify the company that no report is available and suggest future measures.
Accountants keep books of accounts, keep documentation and records, generate financial statements as needed, prepare financial estimates, assess business models, implement budgets, and track actual expenditure on any given day.
Auditors spend their time evaluating financial accounts, following the company’s financial operations step by step, identifying significant areas of fiscal risk, recommending controls for each risk discovered, and validating the company’s financial statements.financial documents, creating an audit trail, and writing audit reports to share with employees or business units who rely on the accountant’s financial statements.
Accountants are usually found in middle management positions. Internal auditors frequently communicate this information. While external auditors are not part of a company’s structure, their job takes precedence over that of accountants, therefore they tend to outrank internal finance professionals.
Type of work
The role of an accountant is both analytical and operational. The role of an auditor is analytical and investigative.
Cycle of work
Accounting operations are still in progress. Auditing is done on a regular basis, in accordance with a company’s reporting obligations.