Accounting and Auditing

Accountants are primarily responsible for a wide range of tasks, including tax preparation and financial planning.

Accountants are utilising their expertise and knowledge to help clients in a variety of ways.

Many accountants are expanding into specialised services to gain an edge over the competition. Audit is one of these expanded services.

What is the difference between auditing and accounting?

Accounting and auditing go hand-in-hand. Accounting gives information about the financial health of a business, its profitability, and performance, while auditing is used to verify the accuracy of the accounting data. The work of an accountant is essentially certified by an auditor.

An audit’s purpose is to get an independent opinion on a company’s financial statements. This opinion gives insight into the accuracy and reliability of the financial statements and reports.

Financial statements (i.e. income statements, cash flow statements, and balance sheets) are used to capture various company transactions, including operating, investing and financing activities. These statements are internally developed, so an independent third-party is needed to verify there has not been any fraud by those who prepared them.

Auditing ensures that financial information is presented accurately and fairly, in compliance with accounting standards. For Gloucester accountants, visit www.randall-payne.co.uk/services/accountancy/gloucester-accountants

What types of auditing are there in accounting?

There are three types of audits in accounting: internal, external and tax audits.

Internal auditors are accountants who work for a company and examine financial and business issues. Internal audits are conducted to verify compliance with regulations and laws, improve internal controls and identify weaknesses in processes before external auditors review them.

External auditors are independent and work outside the company to evaluate financial records. They provide an objective report after a thorough assessment that confirms whether the financials of the company are accurate and complete, or provides guidance to the company in making more informed financial choices.

Tax audits are also performed to verify accuracy of the taxpayer’s return and certain transactions. Tax audits are usually determined by a statistical formula which compares the taxpayer’s tax return to other returns. A tax audit may be conducted on a taxpayer if an audit finds that they have had tax-related transactions with another company or person.

Why do accountants become involved in auditing?

A good accountant will be meticulous and detail-oriented. Even the smallest mistake can prove costly for organisations of all sizes. Accounting is a very demanding profession. The last thing an accountant wants is an auditor coming behind them and finding discrepancies.

Auditors are meticulous in their attention to detail, but they also possess strong investigative skills which enable them to track down clues and detect fraudulent behaviour. Auditors are good at detecting honest mistakes but also dig deep to uncover deliberate and intentional errors.