Difference between Accounting and Auditing

                                                                                  

Accounting involves recording, analyzing, processing, and interpretation of data about the transactions of a business concerned. It is also concerned with the preparation of the financial statements (i.e. profit and loss account and balance sheet) and other reports for the use of management. The financial statements are invariably prepared at the end of the financial year of a business. The external auditor, however, audits the accounts and the annual statements. In other words, the auditor makes an examination of the vouchers and accounts, and then checks profit and loss account and balance sheet with the books. His main object is to verify whether the balance sheet represents the true and correct view of the financial position of the business concerned or not. The main features of accounting and auditing have been presented in a tabular form as under: - 

                                                                       

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Accounting:

1. It involves recording of business transactions in the books of accounts. 

2. It involves the preparation of financial statements (i.e., Profit and loss account and balance sheet). 

3. Interim financial statements and various prepared for management.

4. Pakistani laws has not prescribed any qualification for a person to be appointed as an accountant. 

5. The accounting work is performed by an accountant under the instructions from the management. 

6. An accountant is responsible for his work to the management. 

Auditing:

1. it is concerned with the examination of accuracy and correctness of accounts.

2. It means verifying and checking the financial statements with accounts and expressing professional opinion on the financial positions of the business concerned.

3. It is not concerned with the interim statements and the various reports. 

4. Pakistani law provides that only a chartered accountant can work as an auditor of a public limited     company. It is concerned with the examination of accuracy and correctness of accounts.

5. The auditor is appointed by the shareholders of a company and works under the authority given to     him by the Companies Ordinance 1984. 

6. The auditor's rights, duties and liabilities are defined by the law. Companies Ordinance,               1984,Societies Registration Act are the examples.