Difference Between Accounting and Auditing: A Simple Explanation!

“Accounting refers to a business language, while auditing adds a reality check”

Just imagine, you are a business owner and tax season is about to arrive. You wish to hire a professional who maintains your records and finances. Later, you realise that instead of an accountant, you hired an auditor. This leads to your records being in a mess while tax deadlines are just approaching. 

You are not alone; most people confuse the two terms, especially beginners. Thus, it’s important to understand the difference between accounting and auditing, as both terms serve different functions, purposes, and require different skill sets. 

This blog breaks down the simplest way to differentiate between accounting and auditing. Whether you are a student, a business owner, or just someone curious to understand the difference, this is your one-stop guide. Let’s scroll down right away! 

What is Accounting and Auditing: Definition! 

Accounting	Auditing
Accounting simply refers to recording, classifying, summarizing, and interpreting financial data.	Auditing refers to the examination of financial statements, books, and processes to ensure 100% accuracy and compliance.
Accounting is mostly carried out by the inhouse employees of an organization.	Auditing is majorly done by the external or internal entities also known as auditors.

What are the Similarities Between Accounting and Auditing? 

1. Deal with financial data and records. 
2. They adhere to legal and compliance frameworks. 
3. Financial accuracy and reliability matter for both accounting and auditing. 
4. Require experts with skills in accounting standards and compliance. 
5. Both derive strategic decision-making. 

Learn about the Benefits of Accounting Standards to understand why adhering to established principles improves auditability

What are the Key Differences Between Accounting and Auditing? 

Category	Accounting	Auditing
What is the purpose?	It captures the actual performance, financial health, and profitability of the business.	It validates the accuracy of financial records and statements submitted by the business.
Importance	It determines if the business is facing profit/ loss and what’s the financial position for the specific period.	The importance of auditing is just for determining the accuracy and reliability of recorded financial statements.
When is the process carried	Since the business transactions take place everyday, accounting is leveraged daily.	Auditing refers to the periodical examination carried either monthly, quarterly, or annually.
Who is responsible for processing financial accounting and auditing	Accountants or in-house employees take care of accounting processes	Auditors do the periodical assessment of financial statements
When is it initiated?	The accounting process begins as the bookkeeping comes to end.	The auditing process starts as the accounting gets completed.
What is the focus?	Accounting mainly focusses on daily financial activities.	Auditing fosters more on previous financial statements.
What are the governing standards?	Accounting is administered by accounting standards.	Auditing is administered by auditing standards.
Remuneration	Accountants are given a salary every month or based on their work.	Auditors are offered with auditing fees.
Who are the reports submitted to?	Reports are generally submitted to management bodies of the business.	Reports are generally submitted to the shareholders in the organization.
Meetings	Accountants don’t generally attend shareholder meetings.	Auditors form the part of shareholder meetings.
Misconduct of standards	There are usually no proceedings held against accountants for misconduct.	Auditors usually go through strict prosecutions for misconduct.

As we have understood the key auditing and accounting differences, it’s time to see why they are important. 

If you are also curious about how cost accounting differs from financial accounting, check our guide on Cost Accounting vs Financial Accounting

Importance of Accounting and Auditing! 

Both accounting and auditing have importance into the financial ecosystem. Let’s scroll down to see the difference between accounting and auditing in terms of their importance.  

Importance of Accounting 

• Accounting processes assist in tracking all financial activities for an organisation, irrespective of its size. 
• It records every financial statement, which is crucial for the management of the company. 
• It helps to identify the departments that are underperforming and need correct strategies to enhance them. 
• It presents a clear image of risks as well as opportunities served by the business.  

Importance of Auditing 

• Auditing reflects the unbiased behaviour of the business. 
• It flags the errors in the business operations that need corrective measures. 
• Auditing processes integrate transparency in the financial ecosystem of the business. 
• External audits add credibility, enhance vendor relations, and construct a positive image of your business among the audience. 
• The auditing process also raises the credit rating, attracting banks and investors. 

Accountant Vs Auditor: Roles Compared

Accountants and auditors are assigned tasks related to financial accounting and auditing, respectively. Check out the key difference between their roles.  

Accountant	Auditor
Ensures accurate and timely financial reporting	Ensures accurate, fairness, and compliance of Financial data
He works consistently throughout the year	He reviews the financial data periodically at the end of the financial year
Accountant mainly emphasizes on day-to-day financial transactions and reports	Auditors foster internal controls, frauds, and compliance.

Accounting is not only about managing financial records, it caters to analyzing the statements and generating financial insights that support strategic decision making. 

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Conclusion! 

Accounting ensures organised financial records, while auditing reflects accuracy and transparency. Both are crucial to construct a strong, compliant, and successful financial future for a business. But most of the time, we fail to differentiate between the two. 

Whether you are a startup or a freelancer, understanding the difference between accounting and auditing helps you make smarter financial decisions. 

Save the article on the difference between accounting and auditing for further use. Bookmark it right away and share it with the ones who need to read it. 

FAQs On The Difference Between Accounting and Auditing 

Which one is better: an accountant or an auditor? 

While an accountant’s job is consistent, an auditor has more decision-making power. So, choosing which one is better completely depends on your requirements.

What is the main difference between accounting and auditing? 

Accounting focuses on managing daily financial transactions, while auditing is more about ensuring fairness and accuracy of these records. 

What is the importance of auditing in accounting? 

Accounting and auditing go hand in hand. Auditing becomes crucial in an accounting framework to rectify the discrepancies and avoid compliance issues. 

What is auditing in accounting? 

Auditing in accounting refers to the general verification and examination of accounting records. 

Is accounting and auditing the same? 

No, accounting is different from auditing in terms of definition, skills, and purpose. Though they are interlinked, serve different goals.