Accounting VS Auditing

Accounting is systematically process of book keeping of an entity and preparation of financial statements at the end of the year that useful for internal and external users. Moreover, accounting capturing the day to day monetary transactions of the business and classifying them into various groups along with that. The main purpose of accounting is to to provide a company with clear, comprehensive, and reliable information about its economic activities and status of its assets and liabilities. There are statements for example the balance sheet, income statement, statement of changes in equity and statement of cash flow. Therefore, accounting can reveal the profitability and sustainability of an organization.

Auditing is the process of reviewing and investigating any aspect of a business, whether financial or nonfinancial to giving an opinion on audit report based on true and fair view. Auditors analyse and compare accounting reports and confirmation documents as well as verify conformity of a company's accounting such as financial statements with established standards and regulations for example US GAAP, IFRS and etc. Therefore, the main goal of an audit is to perform thorough evaluation of a company's financial records and reports and provide a company with improvement recommendations based on that evaluation.

Main Differences between Accounting & Auditing

Firstly, accounting is governed by Generally Accepted Accounting Principles (GAAP) and international accounting standards. In contrast, auditors check for accuracy or material misstatements and their auditing processes are governed by Auditing Standards. Both of accounting and auditing must obey the exclusive standard.

Secondly, in accounting the accountants produce the financial statements at the end of the financial year and it is continuous activity for every year. For auditing, auditors issue an opinion on whether the financial statements of a company present a true and fair when requirements of audit report and which is a periodic activity.

Thirdly, 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.

Fourthly, 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 such as fraud and etc. Therefore, accounting is necessary for every single business but audit is not necessary and it is optional to choose whether do or not to do the auditing.

Lastly, accountants are usually employees of the company for which they work, whereas, auditors are normally hired from an outside firm to verify the accuracy of the accountant’s work. Although not always the case, an auditor generally has no financial connections to the company unless is internal auditor.

References link below:

http://studypoints.blogspot.my/2011/09/what-is-difference-between-auditing-and_530.html

http://simplestudies.com/difference-accounting-auditing.html

The Importance of Audited Financial Statement

At first, financial statement is helpful for users no matter internal users or external users and they need to go through the financial statement to check the sustainability of the specific company. Therefore, an audited financial statement can leads accuracy of the information or statement in financial statement make users feels that can fully trust and rely on the information which is audited.

Why an audited financial statement is importance of a business firm?

Firstly, audited financial statement is able to determine the reliability of information. Every business is required to appointed auditors to analyze their financial statement of company that auditors in order to form an opinion about their financial well-being. Moreover, as auditors stand responsible for their role and tasks, they will consider an organization will put funds at risk with the business. Since auditors have the right to subject the financial statement, therefore auditors are purposely to do that which is investigation. Company need to face rigorous professional examination where auditors prudently go through the company’s books and records which is information. Furthermore, conduct an external audit by a qualified public accounting firm will satisfy most questions about the reliability of its financial.

Secondly, companies are required by law to issue audited financial statements and the audited financial statement is either to satisfy the requirement of certain external or internal users, bank, investment firms and includes in lieu of employing internal auditors. By the way, the board of directors are responsible to go through selection of auditors that hire an auditing team based on it solely name and ensure that it is well-qualified and has experience in the company's industry when company plans to conduct an audit. Moreover, conducting an audit of financial statement is considered a matter of planning which is the process of observation, inquiry and inspection of internal financial books and records. Auditors undertake various tests, such as requesting confirmations of orders from a sampling of customers, to prove the accuracy of items in the financial statements and etc.

Lastly, audited financial statement is important because auditors have to conduct an audit opinion based on the audited financial statement to prove the current condition of the specific company. Auditors are taking different period to fully audited a company depends on the size and complexity of the company being examined. After audited the financial statement of company, auditors will found out whether the company have obey the standard of GAAP or not and state in the audit report which includes audit opinion. Furthermore, there are few types of audit opinions include unqualified opinion and qualified opinion to determine the condition of company. As information, unqualified opinion means that materials were in order and met all auditing requirements and qualified opinion is means the statements do not accurately reflect the company's condition or company didn’t obey the required standards.

Reference below:

http://yourbusiness.azcentral.com/importance-audited-financial-statements-business-firm-17757.html