by When accounting process ends, auditing begins, for the purpose of determining the true and fair picture of books of accounts. It is an activity of record keeping and preparation & presentation of the financial statement. Accounting is used by the firms for keeping a track of their monetary transactions. It is the language the business understands, as it is the tool for reporting financial statement of the business entity.
Conversely, Auditing is an activity of verification and evaluation of financial statement. It aims at checking and comfirming the authenticity of financial books prepared by the accounting staff of the enterprise. Thus, it determines the validity and reliability of accounting information.
Accountancy
It is the process of recording, classifying, summarising and interpreting all the financial transactions.
Accounting
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.
The main function of accounting is to provide material information, especially of a financial nature for decision making. Cost Accounting, Management Accounting, Tax Accounting, Financial Accounting, Human Resource Accounting, Social Responsibility Accounting are the fields of Accounting. The primary objectives of Accounting are as under:
Proper record keeping through Journal, Subsidiary Books, Ledger and Trial Balance
Determination of the results (profitability position) from the records maintained through Trading and Profit & Loss Account
Showing the financial position of the entity through Balance Sheet
Providing necessary information about solvency and liquidity position to the interested parties.
Auditing
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 organization 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.
The auditor will inspect the accuracy and transparency of the financial information, compliance with the accounting standards and taxes are properly paid or not. After the complete inspection of accounting books and financial records, he will give an opinion in the form of a report. The reporting on the true and fair view shall be made to the person who appoints the auditor. There are two types of Audit Report, they are:
(i) Unmodified
(ii) Modified
- Qualified
- Adverse
- Disclaimer
The audit can be conducted internally and externally. The task of internal audit is conducted by an internal auditor who is appointed by the management of the organization for improving its internal control systems and accounting system. External Auditor is appointed by the shareholders of the company.
Differences between Accountancy and Auditing
Conclusion
Accounting and Auditing both are specialized fields, but the scope of auditing is wider than accounting as it needs a thorough understanding of various acts, tax rules, knowledge of accounting standards and standards on auditing as well as communication skills are also required.
Apart from that, confidentiality, integrity, honesty and independence are the basic requirements that is to be maintained while performing the audit procedure. The reports submitted by the auditor are helpful for the users of the financial statement like creditors, shareholders, investors, suppliers, debtors, customers, government, etc. for rational decision making.
Although Accounting is not less, it also requires complete knowledge of the accounting standards, principles, conventions and assumptions as well as Companies Act rules and tax laws. The procedure of auditing is conducted only when the accounting is done properly so; it cannot be neglected.
