Question

describes relationship and differences between accounting and auditing

Answer 1

Ans. : Relationship between accounting and auditing is as follows :

* Based on methods : Accounting methods involves identifying the events and transaction that effect entity. Audit of financial statements involves obtaining and evaluating the evidences concerning management finance statements to enable the auditor to verify whether the statement do in fact present fairly the entity financial position.

* Objectives : Objective of accounting is the communication of relevant and reliable financial data that will be useful for decision making. While auditing generally covers final financial statements and records.

* Responsibility : In accounting ultimate responsibility for financial statements lies with the entity's management. Accounting is very comprehensive and captures all details associated with financial transactions, records and statements; whereas auditing usually uses financial statements and records on example basis.

* Timing : Accounting is conceded out on a constant basis with a daily recording of financial transactions; while auditing is essentially a periodic procedure and conceded out after the preparation of final accounts and financial statements, generally on yearly basis

Differences between accounting and auditing is as follows :

* Accounting means systematically keeping the records of the accounts of an organization and preparation of financial statements at the end of the financial year. Auditing means inspection of the books of account and financial statements of an organization.

* Accounting is governed by accounting standards where as auditing is governed by Standards on auditing.

* Accounting is performed by accountant where as auditing is performed by Standards on auditing.

* Accounting starts where book keeping ends where as auditing starts where accounting ends.

* Accounting is a continuous process, i.e. day to day recording of transactions are done. Auditing is periodic process.