Difference Between Accounting and Auditing

Edited by Diffzy | Updated on: April 30, 2023


Difference Between Accounting and Auditing

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The classic tick of the clock as the last-minute approaches, sweat dripping down the forehead as you try hard to keep your cool, your eyes running over the same sentences over and over attempting to find errors in your writing, the synchronised clicking of the heels of the invigilator getting louder and quickening your pulse as they approach your desk to collect the answer sheet. You eventually give in with a grunt and let them at it hoping and praying that you have indeed done your best. All of us have been through this nerve-wracking experience more than just once in our lives. And every single time, it only feels worse than the last.

The importance of checking and re-checking an answer sheet could be the difference between an A and an A+, you only have to ask the scholars. Such a difference, while massively significant for the student at the school level has a higher significance when it comes to real-life scenarios. Not necessarily while settling an argument of which shade is the shade of the season – pink or mauve. It is rather more significant in the realms of finance.

Accounting vs. Auditing

Money-making businesses need utmost precision when it comes to handling the money since that is both – their objective and their incentive. Every single cent is essential. A single mishap in its record could cost the record-keeper their job. These record-keepers are accountants and auditors. Accounting and auditing are both processes that check and re-check the accounts. In simple words, accounting is inspecting the account and the process of auditing is inspecting the results of the accounting process. It is a double evaluation of sorts. While these processes are similar, they have other factors differentiating them.

Differences Between Accounting and Auditing in a Tabular Form

Function Accounting is the process of maintaining a record of the financial statements of a company. Auditing is the process of examining the financial records put forth as a result of accounting.
Purpose Accounting has to provide a true and accurate record of the company’s finance. Auditing has the purpose of verifying the reliability of the records produced by accounting.
The person appointed Accountant Auditor
Start of work Accounting starts when the book-keeping task is accomplished. Auditing begins after accounting is completed.
Types There are many types of accounting depending on the area of requirement – financial accounting, managerial accounting, cost accounting etc. There are mainly 2 types of auditing – internal auditing that is performed by an auditor employed by the company and external auditing that is performed by the auditor employed by the shareholders. An additional type of auditing is IRS (Internal Revenue Services) auditing performed by IRS officers.
The key deliverable Accounting process gives the account of the financial statements which represent the monetary activity of the company. Auditing process yields a result of the company being either ‘unqualified’ or ‘qualified’.
Daily activities In accounting, the daily activities include maintaining accounts, financial records, analyzing the company’s business model etc. In auditing, the daily activities include examining the reports produced by accounting, assessing fiscal risks, suggesting controls for such risks, verification of financial documents etc.
Level Accountants are mostly middle management. Internal auditors are mostly middle management but external auditors outrank the internal auditors since their work takes precedence.
Work type An accountant’s job is operational and analytical. An auditor’s job is investigative and analytical.
Work cycle An accountant’s job is continuous and ongoing. An auditor’s job is periodic. It occurs in shifts.

What is Accounting?

Accounting is everything to do with maintaining the records. Every single penny is to be accounted for. It is called a specialized language of business that helps in the comprehension of all the monetary activities of the company. It is a systematic and orderly way to record all information about money. Every transaction is recorded, analyzed, classified and then summarized.

The priority of accounting is to maintain the financial record so that the record can aid in making decisions regarding the finances of the company. There are various types of accounting. Following are a few of them:

  • Financial Accounting: It is performing all the essential functions like the maintenance of records, grouping and processing them accordingly and subjecting them to financial analysis for the benefit of both the internal and external stakeholders of the company.
  • Cost Accounting: This type of accounting is to evaluate and set the cost of products – especially the complex products that involve raw materials and various other ingredients for their manufacture. It develops a cost for selling the product depending on the cost of the materials, market competitiveness, profit percentages etc.
  • Managerial Accounting: This type of accounting is the organization of the processes. All the information from all other sectors of accounting is subjected to analysis for the planning of future decisions of the company. It helps the top officials make appropriate and well-researched decisions. This information is further used for forecasting, budget analysis etc.

The objectives of accounting are as follows:

  • Maintenance of all financial records and monetary transactions through journals, subsidiary books etc.
  • Determination of the results of the records that are maintained.
  • Providing a result of the financial status of the company by analyzing the balance sheet.
  • Giving information about the solvency and liquidation position of the company from the analysis of the financial data.
  • Making certain that the company follows the tax laws and regulations.
  • Giving advice to the company about how to better manage their finances.
  • Staying up to date with the changes in the tax laws and regulations.

The reports of the accountant yield the following – the periodic costs of doing business, the statements of profit and loss, profit margins, cost-saving comparisons, the graphs of the financial growth of the company, employee accounts and the market share of the company.

What is Auditing?

Auditing is mainly the reviewing of the accounts. It involves a thorough inspection of the books of accounts and financial statements put forth as a result of the accounting process. Their prime objective is to provide a fair review of the financial standing of the company. Auditors have to remain objective regardless of their associations with or the nature of the company.

Auditing is meant to be an unbiased investigation of every financial transaction undertaken by the company. They examine vouchers, bills, receipts and all other financial documents. The validity and the reliability of these documents are then verified and determined. The transparency and accuracy of the reports are established and their compliance with the standard regulations are checked. Only after an extensively thorough examination of the records, a report is produced.

An audit report can be of 2 types:

  1. Unmodified or unqualified report: This is a clean report. This report expresses the auditors' unqualified opinion. This is indicative of the fact that there were no issues found by the auditor and that the company functions within the laws and regulations appropriately.
  2. Modified report: This report can further be of 3 types. The first one – the qualified report, is indicative of the fact that there has been some problem found in the financial records of the company or that the company has not complied with the tax laws and regulations. The second type is the disclaimer report – here, the auditor excuses themselves to provide an opinion about the financial status of the company. This usually occurs when the company fails to provide sufficient information regarding its business transactions or when the company fails to satisfactorily answer the questions posed by the auditor of its financial records. The last one is the adverse opinion report – this report focuses on the fraud committed by the company. Auditors issue this report when they discover misrepresentations or irregularities in the records implying dishonesty in the functioning of the company.

Auditing as a process can be of 3 types:

  1. Internal Auditing: It is the process undertaken by the internal auditor who is appointed by the company. Their job is to make sure that the internal control systems and accounting systems are functioning optimally. This helps in improving the process management of the company.
  2. External Auditing: It is the process undertaken by an external auditor that is employed by the shareholders of the company. Their job is to perform regulatory checks to ensure the compliance of the company with the fiscal laws and regulations.
  3. IRS Auditing: This is a process undertaken by the IRS or the Internal Revenue Service.

Essentially, the auditor’s job comes only after an accountant’s since they only review the financial report for discrepancies. The main objectives of an auditor are as follows:

  • To ensure that the company has followed all the fiscal laws and regulations.
  • To monitor the efficiency of the accounting system of the company.
  • To detect any fraud in the practices and prevent any fraud if it has occurred.
  • To improve the planning and budgeting of the finances of the company.

Main Differences Between Accounting and Auditing in Points

Following are the main between Accounting and Auditing:

  1. Accounting is a process that involves keeping a record of the monetary transactions of a company while auditing is a process that involves examining the financial records that have been submitted by the accountants.
  2. Accounting provides the true and precise view of the financial records of the company whereas auditing provides a report of the reliability of the financial records.
  3. There are various types of accounting depending on the purpose – cost accounting, managerial accounting, government accounting etc. Auditing is basically of 2 types – external and internal.
  4. The reports of the accountant deliver results of the financial state of the company while the auditor’s reports deliver the results of whether the company is ‘qualified’ or ‘unqualified’.
  5. The daily activities of the accountants consist of maintaining records, and documents, preparing the budget, monitoring spending etc. The daily activities of the auditors consist of critically examining the financial status of a company, identifying the financial risks and suggesting controls for the same, verifying the financial records and creating an audit report.
  6. Accountants generally form the middle management. In auditors, the internal auditors form the middle managerial branch and the external auditors are the higher management since their work outranks the others.
  7. The type of work an accountant does is operational and analytical whereas the type of work the auditor does is investigative and analytical.
  8. An accountant’s work is a continuous and ongoing process that takes place daily. The auditor’s work is periodic. It occurs on a schedule.
  9. The process of accounting is simpler when compared to the complex tasks performed by auditors.
  10. Only after accounting can the process of auditing begin.


Accounting and auditing seem serious and vital for the proper functioning of a company. Without either, the finances of the company could see a downfall. All the financial data – the monetary transactions and records in the form of bills, journals, checks, and books are maintained by accountants. Their thorough and systematic account is what gives a clear indication of the financial ongoings in the company. Only if the records are orderly and accurate can the faults or discrepancies be assessed. Upon assessment, these findings could help better analyze the business model and give solutions to the predicaments. Accountants do all that and more. Accounts occupy the middle managerial position and their job is endless. Accounting is a continuous process and its reports are vital to the growth of the company.

Auditing, on the other hand, is a more complex procedure performed by auditors. They work on the financial reports put forward by the accountants and perform a thorough investigation of the data. They aim to ensure the data is reliable and valid. They verify all the facts and transactions and make certain that the company is working per the tax laws and regulations. Any discrepancy found is reported immediately. The reports of the auditors help discover any wrongdoings or fraud in the company. They also prevent any fraud from occurring and help improve the budget and finances of the company. Ultimately, the goal of both accounting and auditing is to maintain transparency about the workings of the company so that it functions in such a way that is clear and lawful. They have to work in harmony so that the company can flourish financially. Since company fraud is so prevalent the stringent measures taken by accountants and auditors help keep the fraudulent practices at bay.

Thus, the hard implications of imperfections in the financial world need to be monitored with vigilance and accounting and auditing are the two essential processes that make this possible. While not the same as the final check of the answer sheet before submission, accounting and auditing is just as important if not more.


  1. https://www.indeed.com/career-advice/career-development/audit-report-types
  2. https://www.indeed.com/career-advice/career-development/accounting-vs-auditing
  3. https://www.wallstreetmojo.com/accounting-vs-auditing/


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"Difference Between Accounting and Auditing." Diffzy.com, 2024. Fri. 17 May. 2024. <https://www.diffzy.com/article/difference-between-accounting-and-auditing-225>.

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