Differences Between Auditing And AccountingAccounting isrelated to the collection, recording, analysis and interpretation of financial transactions but auditing refers to the examinationof books of accounts along with theevidentialdocuments. So, following differences can be shown between auditing and accounting:

1. MeaningAccounting isthe act of collecting, recording, analyzing and interpretation of financial transactions but auditing is the act of examinationof books of accounts and evidentialdocuments, so as to prove the true and fair view of profitability and financialposition.

2. Beginning Of WorkWork of accounting begins when financial transactions take place but work of auditing begins when work of accounting ends.

3. ScopeAccounting prepares profit and loss account and balancesheetand other statements as per the instruction of auditor but auditor checks the books of accounts considering their fairness as well as complyingwith the provision of company act or not.

4. Nature Of WorkAccounting keeps the record of financial transactions but auditor checks and verifies the books of accounts.

5. StaffAn accountant is a staff of an organization and draws thesalaryfrom the business butan auditoris an independent person who is appointed for specific period and gets a sum of remuneration.

6. Preparation Of ReportAn accountant does not prepare report after the completion of his task but he has to give information to the management when needed but auditor needs to prepare and present report after the completion of his work to the concerned authority.

7. ResponsibilityAn accountant remains responsible to the management butan auditoris responsible to the owners or shareholders.Accountancy vs. Auditing: TheBasicsPosted onApril 17, 2012Ever wondered exactly how the roles of an accountant and an auditor differ? The following is a rundown of the basics involved with each profession.At its simplest, an auditor is the guy who asks everyone questions and an accountant is the guy who gives the auditor elusive answers. While this is a humourous way of putting it, it depicts quite accurately what happens in most organisations the accountant produces the accounts and the auditor audits and qualifies them.Accounting and auditing are related professions, indeed accountants and auditors usually hold the same qualifications. An accountant is a practitioner of accountancy. Accounting involves maintaining and recording of the financial transactions of a company. Accountants ensure that there is proper record keeping within the organisation. The main goal of accounting is to provide the company with clear, comprehensive and reliable information on the operations of the company for decision making. This information in presented in the form of an income statement, balance sheet, statement of changes in equity and cash flow statement.Essentially, auditing starts where accounting ends. Auditors use the financial reports in the evaluation, verification and review of the accounts books of the company. Auditors do an independent appraisal of the strength of the internal control system and compliance of the books of accounts to Generally Accepted Accounting Principles and international accounting standards. They also check on non-financial issues like risk analysis.An audit can be internal or external. External audits are done by independent bodies, like audit firms KPMG and Ernst and Young. Internal audits are carried out by the companys own internal audit department. Other types of audits are forensic and security.Main difference between auditing and accounting:1) Accountants are usually employees of the company whereas external auditors are employees of the audit firm who perform an independent appraisal of the books of accounts. An internal auditor is an employee of the company but is not part of the accounts department. They do not report to anyone in the finance department to avoid a conflict of interest.2) Accounting is governed by Generally Accepted Accounting Principles and international accounting standards. In contrast, an auditors check for material misstatements and their auditing processes are governed by auditing standards.3) Accounting is a day-to-day process, while an audit takes place after a fixed period of time or after the occurrence of an extraordinary event, like fraud.4) Accounting is a must have for all businesses whereas some companies choose to do without audits.5) Accountants provide financial management and other information necessary for effective decision making in the company. By contrast, auditors are not involved in the management of the company and clearly state in their report that the financial statements are the responsibility of the directors of the company.6) After the end of the financial year, accountants produce the financial statements. After the audit, auditors issue an opinion on whether the financial statements present a true and fair picture of activities of the company. Auditors can also claim to have failed to reach an opinion on the accounts due to lack of sufficient information.7) Accountants work in their given offices whereas auditors move from company to company doing their work.8) Accounting is more detailed financial work whereas auditors sample financial information to come to a professional opinion.Accounting and auditing are related and complementary, though the work is done by different sets of accountants with separate skills within the financial field.

Distinction Between Responsibilities of Auditor and Management.02The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.fn1Because of the nature of audit evidence and the characteristics of fraud, the auditor is able to obtain reasonable, but not absolute, assurance that material misstatements are detected.fn2The auditor has no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not material to the financial statements are detected. [Paragraph added, effective for audits of financial statements for periods ending on or after December 15, 1997, by Statement on Auditing Standards No. 82.].03The financial statements are management's responsibility. The auditor's responsibility is to express an opinion on the financial statements. Management is responsible for adopting sound accounting policies and for establishing and maintaining internal control that will, among other things, initiate, record, process, and report transactions (as well as events and conditions) consistent with management's assertions embodied in the financial statements. The entity's transactions and the related assets, liabilities, and equity are within the direct knowledge and control of management. The auditor's knowledge of these matters and internal control is limited to that acquired through the audit. Thus, the fair presentation of financial statements in conformity with generally accepted accounting principlesfn3is an implicit and integral part of management's responsibility. The independent auditor may make suggestions about the form or content of the financial statements or draft them, in whole or in part, based on information from management during the performance of the audit. However, the auditor's responsibility for the financial statements he or she has audited is confined to the expression of his or her opinion on them. [Revised, April 1989, to reflect conforming changes necessary due to the issuance of Statement on Auditing Standards Nos. 53 through 62. As amended, effective for audits of financial statements for periods beginning on or after January 1, 1997, by Statement on Auditing Standards No. 78. Paragraph renumbered by the issuance of Statement on Auditing Standards No. 82, February 1997. Revised, April 2002, to reflect conforming changes necessary due to the issuance of Statement on Auditing Standards No. 94.]

Internal audit (IA) is distinct and different from external audit. While they are complementary functions within the assurance framework which may work closely together and need to be coordinated, organisations will not get the best or most cost effective assurance from IA unless the differences are recognised and IA is treated as a separate profession with its own value and expertise.Both forms of audit are essential for the effective governance of an organisation. Both need to be independent, objective, properly resourced and work according to their respective international standards. But they perform different functions and need to report separately to the board / audit committee.Regulators must take these differences into account when creating policy related to governance and internal audit. Legislative and regulatory references to audit and the auditor should be specific as to whether they are referring to external audit or internal audit.Table 1 The distinct roles of internal and external auditItemExternal auditInternal audit

Recipient of reportsShareholders or MembersBoard members and senior managers

Objective(s)Add credibility and reliability to reports from the organisation to its shareholders by giving an opinion on themProvide the assurance that members of the board and senior management use to fulfil their duties

CoverageFinancial reports and related disclosures, financial reporting risks and their managementAll categories of risks, their management including the flow of information around the company, and governance

Timing and frequencyProject(s) tied into financial reporting cycle, focused on objective of audit opinionOngoing and pervasive

FocusMainly historicalIdeally forward-looking

Responsibility for improvementNone duty to report control weaknessesFundamental to the purpose of internal auditing

Status and authorityStatutory and regulatory frameworkInternational professional standards and Code of Corporate Governance

IndependenceProfessional ethical standards overseen by audit committee and regulatory frameworkProfessional ethical standards overseen by audit committee