Auditing Vs Accounting: “What’s The Difference?”

Dec 19, 2019 | Accounting Industry, Auditing

Accounting vs auditing

Auditing and accounting are two of the most common terms in the finance world. Unfortunately, plenty of people still confuse these two services. In fact, even Hollywood isn’t safe from this confusion. For example, in the movie “The Accountant,” Chris Wolff, Ben Affleck’s character was actually an auditor rather than an accountant.

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To help you untangle your confusion between the two, below is s a comprehensive list of the differences between accounting and auditing.

What Is Accounting?

Accounting is the recording of business transactions to provide users with insight into the performance of the business. Accounting often comes in after the occurrence of these transactions. Furthermore, accounting reports, known as financial statements, are sometimes required by government agencies to help them monitor businesses.

What Is Auditing?

Auditing, on the other hand, is the examination of anything about a business. An auditor may examine the accuracy or reliability of a financial statement from an accountant. They may also determine if the policies of a company are positively affecting it.

Auditing can either be internal or external. Internal auditing is done to help business owners identify aspects of their company that they can improve. External auditing, on the other hand, is often done by government agencies. It helps them determine if a business is following government regulations.

What Are The Different Type Of Accounting?

Accounting is actually a broad group of services. Each type of accounting varies on the purpose, and the output you can expect from your accountant. Here are some of the most common type of accounting services:

  • Financial Accounting: the recording and classifying of business transaction for the creation of financial statements. Financial accountants often follow generally accepted accoutring principles and other international regulations.
  • Managerial Accounting: focuses more on the needs of internal users. Hence, it can use policies that are not in-line with international accounting policies.
  • Cost Accounting: an accounting process done to record and valuate the expenses involved in a manufacturing jobs.
  • Tax Accounting: makes sure that a business’s books are in-compliance to rules set by taxing authorities.

What Are The Different Types Of Auditing?

Auditing, just like accounting, has various branches as well. These differences, on the other hand, are from the specific process that a client wants to auditors to audit. Here are some of the most common type of auditing services:

  • Compliance Audit: checks whether a business follows external business regulations, or if departments follow business policies.
  • Financial Audit: aims to determine the accuracy of the amounts recorded in a company’s financial records.
  • Operational Audit: operational auditors observe the effectiveness of business policies to recommend ways for improvement.
  • Tax Audit: Often done by government taxing authorities on businesses suspected of violating tax regulations.

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