Audit and Accounting
A ledger keeps track of incoming cash.
An audit and an accounting process share differences and similarities, although many use the two interchangeably. The two words involve separate processes that a company could use to prepare and monitor its financial data. Relying on both processes to ferret out questionable procedures builds public trust in a company's financial statements, such as those involving the sale of stock.
Accounting involves handling the daily financial transactions for the company. This includes very diverse functions ranging from the incoming earnings to the outgoing payments. Some accounting functions include the bills or payments sent to vendors. It also includes the cash, check, credit card and electronic payments received from customers; and checks written and received by the company. Payroll and tax deductions, along with the reconciling of the company books for the year, are all accounting processes.
An audit involves the review of the accounting books of the company. An audit may be done through forensic accounting, or conducted by the company itself. If the company is traded on a stock exchange, the audit is usually done by an official independent body. The audit process is an in-depth examination of each financial transaction made by a company and encompasses the total year-end accounts. Upon the completion of the independent audit, the books and accounting procedures are verified as accurate.
Related Reading: Forensic Vs. GAAS Audit
Several differences exist between an accounting and an audit. One important difference is that the audit checks the accounting process to determine its validity. Another difference: accounting is a daily process, whereas an audit is usually conducted annually or quarterly. Another difference is that the accounting is compiled by the employees of the company, while an audit is done by an independent body with no financial ties to the company.