Difference between Accountancy and Auditing
The difference between Accountancy and Auditing is as follows
1. Accountancy is mainly concerned with the preparation of summary and analysis of the records prepared by the book-keeper for this, an accountant has to prepare trial balance and then annual accounts. On the other hand, Auditing means the verification of book entries and accounts to find out their accuracy. So the auditor’s work is to find out whether the final accounts exhibit a true and fair view of the state of affairs of the concern or not and to report his findings to the shareholders.
2. An accountant is an employee of the business while an auditor is an independent outsider.
3. As an employee of business, an accountant draws his monthly salary regularly from the business itself while an auditor is paid a remuneration agreed upon between him and his client.
4. An accountant is not expected to have a knowledge of auditing but for an auditor, it is very essential to possess a thorough knowledge of accountancy.
5. An auditor can be changed from year to year but an accountant is not, as he is usually a permanent employee of the business.
Book-Keeping, Accountancy and Auditing
Book-Keeping, Accountancy and Auditing are the three aspects of the term ‘Accountancy’ itself in its widest sense.Book-keeping is the art of recording the daily transactions in a set of financial books. It is concerned with systematic recording of transaction in the books of original entry and their posting into ledger. A person with the knowledge of rules of journalizing and posting can very easily do the job. In some countries like Africa & England, this work is done by machines.
Accountancy
Accountancy begins where book-keeping ends.” It means that an accountant comes into the picture only when the book keeper has done his job. The functions of accountant can be classified as under :
(i) Checking the work of book-keeper.
(ii) Preparation of trial balance,
(iii) Preparation of Trading and Profit and loss Account.
(iv) Preparation of balance sheet,
(v) Passing entries for rectification of errors and making adjustments.
An accountant is supposed to be an expert in the accounting procedures as he has to examine analytically the final accounts. But it is not necessary for him to pass the chartered Accountant’s examination. He it’s not supposed to submit his report after the completion of work.
Auditing
It is said, “where accountancy ends, auditing begins.” It is sightly said. An auditor has to verify the entries passed by the accountant and the final accounts prepared by him. Thus, auditing is the checking of the accounts of a business with the help of vouchers, documents and the information given to him and the explainations submitted to him. An auditor has to satisfy himself after due verification and complete. Checking of accounts as to whether the transactions entered into the books are accurate. An auditer is required to submit his report to the effect whether or not the balance sheet is a true and fair representation of the existing state of affairs of a business concern.
Thus, an auditor should have the proper knowledge of accounting principles. That is why he should be a chartered Accountant. He has to express his impartial opinion in his report which he can not give unless he satisfies himself completely with the proper recording of transactions. Thus, auditing is based on accountancy and not accountancy on auditing. An auditor must be well familiar with the principles and practical aspects of accountancy but it is not necessary for an accountant to be an expert in the audit work.
Audit and Investigations
There is a lot of difference between auditing and investigation which is as follows :
1. Audit is conducted to find out whether the balance sheet is properly drawn up and exhibits a true and fair view of the state of affairs of the business while investigation means a searching enquiry with certain object in view, e.g.; to find out the profit earning capacity, or the financial position of a concern or a fraud and the extent thereof.
2. Investigation covers several years, say, 3,5, and 7 years to find out the average earning capacity,Financial position, etc. of a concern while audit usually relates to one year.
3. Investigation may be carried out on behalf of outsiders who either want to purchase the business,to become partners, to advance loans or to purchase the shares of a firm. Audit is always conducted on behalf of proprietors only. However investigation may also be carried out on behalf of proprietors in case fraud is suspected.
4. Audited accounts are further investigated for some special purpose in view while investigated accounts are not audited in the ordinary course.
5. Audit is legally compulsory, specially in case of companies, but investigation is voluntary and depends upon the necessity of some purpose in view.
