Accounting and auditing are both interrelated as without accounting there cannot be any auditing and without audit the accounting records would not be considered as accurate. However there are many differences between accounting and auditing, let’s look at some of them –
- Accounting involves preparation of financial statements like profit and loss account, balance sheet, cash flow statement and funds flow statement. While auditing involves checking financial statements with the help of vouchers, inspection and other such documents.
- While accounting is done on day to day basis and therefore these records needs to be updated continuously whereas auditing is done only after a certain period of time which is usually a year and it involves checking and pointing the mistakes so that the errors can be corrected.
- Accounting is done by the employees of the company only and therefore it is an internal process while auditing is not done by employees but by auditor who is outsider and therefore it is more of an external process.
- While under accounting there are certain principals and rules by which the financial statements are prepared, these rules are also known as GAAP and hence it is less flexible in nature whereas under auditing there are no strict rules and regulations and therefore auditing differs from individual to individual and hence it is more flexible in nature.
- While accounting can be done by individuals having commerce background also, in other words you do not need to have high level of knowledge about the subject. However in order to do auditing an Individual needs to be professional having required knowledge and degree to carry out the process.
- Accounting is done by almost every company; however auditing is done only by those companies which according to income tax and government laws are required to have audit.