Accounting Vs Auditing: Which is Better?

While the terms “Accountant” and “Auditor” are frequently used interchangeably, are they truly synonymous?

Typically, an audit is conducted by a Certified Professional Accountant or CPA. Auditing is a required course of study in all accounting programs. Thus, while you may consider auditing to be a subfield or category of accounting, the two are quite distinct in practice.

We’ll break down the fundamental definitions and purposes of affordable accounting and auditing, as well as who does what and what you should know as a tax preparer, in this piece.

Accounting: What exactly is it?

Accounting can be defined as a system for arranging and recording the financial transactions of a firm or other entity. Naturally, accounting becomes significantly more complicated from there. Accounting practices for various organisations and situations are determined by various governing agencies, such as the AICPA and the FASB.

Who is capable of doing so?

Because the term “accountant” is not regulated, anyone with that employment title can use it, even if they lack proper accounting knowledge. The CPA designation, on the other hand, is heavily controlled, requiring graduate-level education, a difficult four-part examination, at least two years of practice under the supervision of another CPA, and continuous education.

Diverse businesses and professions will necessitate varying degrees of competence. Public accounting businesses almost always prefer to hire CPAs or candidates for the CPA credential.

Private enterprises have a wide variety of requirements. A small business accountant with simple financial statements is able to maintain their client’s books and submit their taxes independently, effectively serving as their own accountant. While some firms do not require formal accounting education for bookkeeping positions, the majority of businesses will require at least a bachelor’s degree for staff accountant employment. The majority of businesses choose CPAs for senior accountant jobs and above.

Auditing

While there are additional sorts of audits, the most prevalent are internal and external financial audits, as well as IRS tax audits.

Audits of Financial Records: Who or what are they?

Contrary to popular opinion, financial auditors do not conduct audits solely to hunt for instances of fraud. While uncovering fraud is occasionally a component of the work, the external financial auditor’s goal is to assist in providing reasonable assurance that a company’s financial reporting is free of what are known as “material misstatements.”

External audits produce a professional audit opinion, which instills trust in financial statement consumers — such as potential investors or lenders — that the financial statements are correct.

Internal audits are conducted to assist management in identifying weaknesses in their organization’s internal controls and compliance with applicable requirements.

Who is capable of performing them?

While non-CPAs (such as interns or staff accountants pursuing their CPA) are permitted to help with an external audit, the professional audit opinion must always be provided by a CPA. Additionally, external auditors must appear and act independently, which means they cannot have a conflict of interest with the firm they are auditing, such as investing in or accepting gifts from the company.

Internal audits are typically conducted by in-house personnel rather than by a public accounting firm. Internal auditors are not required to be CPAs, but many are. This is because internal audits are not controlled by governing agencies.