Accounting vs Auditing – 20 Difference between Accounting and Auditing
Difference between accounting and auditing are as under:
Accounting vs Auditing
| Basis for comparison | Accounting | Auditing |
| 1. Meaning | Accounting is the art of recording, classifying and summarizing in terms of money transaction and interpreting the results thereof. | Auditing is concerned with the verification of accounting data with determining the accuracy and reliability of accounting statements and records. |
| 2. Scope | Accountancy refers to the preparation of final accounts and its interpretations. | Auditing refer to examination and checking of these records. |
| 3. Nature | Nature of accountancy is constructive and with current recording of business facts. | Auditing is analytical in nature and essentially retrospective. |
| 4. Objects | The main object of accountancy is to ascertain the trading results of a business concern during a financial year. | The objective of auditing is to certify the correctness and justification of the financial statement prepared by the accountant. |
| 5. Qualification | Legally no specific qualification is required for the appointment of an accountant. | An auditor must be a chartered accountant, who has obtained a certificate of practice from ICAP and has established his own practice as an auditor. |
| 6. Commencement | When book-keeping records completed, they become available for beginning of work of accountancy. | The work of auditing starts when the work of accountancy completed. |
| 7. Knowledge | An accountant needs not to be expert in the work of auditing. | An auditor must have thorough knowledge of principles of accountancy otherwise he cannot perform his job. |
| 8. Appointment | Accountant is appointed by management of the company. | The first auditor is appointed by the directors or by shareholders or by SECP while subsequent auditor is appointed by the shareholder of a company. |
| 9. Duration | Accounting work is undertaken throughout the year. | Auditing is generally done at the end of the financial year. |
| 10. Status | An accountant is a permanent employee of the business. | An auditor is not a permanent employee of the business. He may be changed year to year. |
| 11. Report | An accountant is not required to submit a report to the proprietor of the concern when the accounting work is over. | An auditor is required to submit the report to the proprietor after the completion of his audit work. |
| 12. Remuneration | It is fixed by the management of the company. | General rule is that remuneration of the auditor is fixed by the person making appointment. It is fixed by the shareholder of the company if his appointed by shareholder. |
| 13. Removal | Accountant can be removed by the management at any time. | An auditor once appointed cannot be removed until the conclusion of next annual general meeting. |
| 14. Liabilities | An accountant’s liability is fixed by the management. | he auditor’s liabilities are enumerated by the companies act and the Chartered Accountant Act. |
| 15. Advice to client | During the course of preparation of financial statements and their analysis the accountant has to suggest methods of improving the accounting system. | Though an auditor give some advice to improve the same. But it should make clear that it is not statutory duty of an audit or as part of his. report. |
| 16. Rights and duties | The management of the organization determines the rights and duties of an accountant. | The relevant law of chartered accountant laid down the rights and duties of an auditor. |
| 17. Technique | Accounting technique includes the recording of financial data, depreciation amortization valuation and interpretation of results. | Auditing includes the examination of the financial record by youching verification and valuation. |
| 18. Sequence of work | The sequence of work is happening of any financial transaction, its recording, posting, taking the trial balance and finally preparation of the financial statements. | An auditor’s work is started where an accountant ends his work the vouching verification valuation and reporting is the sequence of audit. |
| 19. Necessity | To know the result of business accounting is the necessity of every business either it is small or large. | Auditing proves the authenticity of accounting record but it is not necessity of every business. |
| 20. Influence | Accounting is an employee and performs his duties under the influence of the management. |
An auditor does not accept the influence of the management because he is not employee of the business. |
These are the major key differences between accounting and auditing.
