Question

in the conduct of audits of financial statements, it would be a serious breach of responsibility if the auditor did not thoroughly understand accounting. However, many competent accountants do not have an understanding of the auditing process. what causes this difference?

Answer 1

The function of auditing is very much different from function of accountant. Accounting is the art of recording, classifying and summarizing the economic events to provide relevant information to the decision makers i.e. high level of management. Accounting is basically recording financial transactions. Accounting creates foundation for preparation of financial statements which needs to be audited by the auditors.

Hence, the rules of accounting are criteria used by auditors to check whether the accountant has followed them or not. This helps the auditors to evaluate the presentation of economic events for financial statements. The auditor bases his opinion on the basis of records prepared by accountants. Hence, the auditor is required to have professional competence and knowledge i.e. of International Financial Reporting Standards, relevant accounting standards as well as auditing standards.

In conclusion, accountants do not know what auditors do unless trained as one.