Commercial Law and Preliminaries of Auditing · Ch 3 — Introduction to Auditing
Relation and Distinction Between Accounting and Auditing — An Auditor Is Not an Accountant
Relation and Distinction Between Accounting and Auditing — An Auditor Is Not an Accountant
Accounting and auditing are closely related but distinct activities, and confusing the two is one of the most common mistakes at this level.
Relation. Auditing is entirely dependent on accounting — an auditor cannot examine what has not first been recorded. Accounting supplies the raw material (the books of account, ledgers, vouchers) that auditing then examines. In this sense, auditing begins where accounting ends.
Distinction — An Auditor is not an Accountant
| Basis | Accounting | Auditing |
|---|---|---|
| Nature of work | Recording, classifying, and summarising financial transactions | Independently examining records already prepared |
| Performed by | An accountant (may be an employee of the business) | An auditor (must be independent of the business) |
| Timing | A continuous, ongoing process throughout the year | Usually a periodic exercise, commonly at the year's end |
| Starting point | Begins with source documents (vouchers, invoices) | Begins where accounting ends — with the finished accounts |
| Objective | To ascertain the profit/loss and financial position | To verify whether the ascertained profit/loss and financial position present a true and fair view |
| Governing standards | Accounting Standards / Ind-AS | Auditing Standards (Standards on Auditing) |
| Qualification needed | No statutory qualification is compulsory to maintain books | A statutory auditor of a company must hold a recognised professional qualification (see Section h) |
Note
Why This Distinction Matters …