Auditing is analyzing the statements, information, footnotes, additional adjustments, information, and remarks of the company for a fixed term. From the Latin dictionary, the meaning of the term Audit signifies “äudire”. It is to measure the accuracy of the accounts with independent review. The public companies and even non-profit companies need to do auditing practice to keep up the credibility of accountancy.
The professional responsibility of accountants and auditors is measured using professional ethics. Auditors need to have honesty and noble cause in the conduct. Accounting professionals need to have detailed knowledge of the jurisdictions that govern accounting practices. As the auditor is an external person, he needs to keep up the objective all through the process. Unless there is the enforcement of the law to uncover the commercial data of the company, he ought not to give sensitive financial information to other people.
Accountancy is the bookkeeping method to record the transactions of the business. On the contrary, Auditing is matching the evidence with the transactions, checking whether the operations and results are following the GAAP, and checking the fairness of the accounts. Accounting is to check the performance of the company over a period. Tracking the errors and adding contributions to maintain accuracy is the dual duty of an auditor. An accountant is a person appointed by the company, but the auditor is the person appointed by the shareholders of the company. From the perspective of the job, the following points loom the relationship between auditing practice and accounting.
Responsibilities of an Accountant and Auditor
The professional responsibility of the accountant is comprehensive. It includes recording the day to day transactions, statements, and records. The responsibilities of an auditor are to check the records and statements of the company on yearly basis. After preparing the final accounts, the liability of the accountant gets complete. The liability of the auditor gets complete after preparing the audit report.
Reporting of an accountant and auditor
The purpose of preparing accounts is to communicate the financial data, and the purpose of the audit is to check the final data prepared by the management. The report prepared by the accountant goes to the management team of the company. The report prepared by the auditor goes to the shareholders. The audit report of the auditor is collected to publish along with the financial results of the company.
The Nature of work of an Accountant and Auditor
Accountants pay attention to the current changes in financial transactions. Auditors pay attention to the records, and they use to check on the sample basis. If the shares of the company are traded, then the audit professionals are sent from the sovereign body.
The qualification of an accountant can be graduation or post-graduation. For auditors, it is mandatory to have a specific-qualification like Chartered accountancy.
In an economy of a financial crisis, it is essential to devise healthy functions like auditing system. Banks require an internal audit to address different compliances and risks. From an investment viewpoint, auditing and accounting system provides transparency of accounts. Investors look into two perspectives while investing. One is the market price, and the other one is the financial statement. The risk associated with the investment is not known to the investor if the financial statements are not transparent. The transparency also depends upon the number of companies under the parent company. So, growth and risk are the integral components for investors to invest in the company. For corporate companies, a budget audit helps get fresh ideas. It gives ideas about cost management, documentation of budget, data support, and participation of the managers. The audit is helpful for government agencies, individual businesses, and companies to allocate funds to departments, implement major decisions, and involve in productive exercises. For employees with professional skills, monotonous work is not acceptable, and consequently, they want a challenging environment to work. Auditors are alluded to as trainers and mentors to organize the business efficiently. The organization tends to gauge accomplishment through the best judgment of the auditors.