Concepts of Accounting and Auditing

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Introduction

For organizations to always ensure there is controlled management of its resources there is need for continuous recording of any transaction or business deals that the management engages in. In addition, considering the diversity of business transactions in organizations, sometimes it hard or impossible for managements to remember all transactions engaged in. on the other hand, in an organization management changes are inevitable; hence compounding these factors makes it important for an organization to adopt good management policies. These policies should emphasize correct and accurate recoding of all business transaction conducted. In addition to recording, due to varying transaction conducted by different departments in organizations, it is important for organizations’ managements to conduct continuous checks of its transactions to confirm or ascertain managers and other employees follow set or required business ethics.

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Accounting

Accounting primarily involves the act of preparing transaction records that is, recording, categorizing, and giving a summary of all business transactions or deals in correct accounting books; in a specified manner following set ethics. For example, all government departments should balance their accounts and present reports before the state makes new budgetary allocations. Organizations conduct this exercise primarily to help them determine their performance level, in terms of financial position and business viability. These records in most cases act as the main source of business decisions in that they help organizations to determine business capability and viability. For organizations to accomplish this duty, they have to seek help from accountants; practitioners trained and registered to conduct accounting procedures. Primarily accountants deal with present data, because their main objective is to ensure there is balance in business transactions of an organization; in terms of input and output. Most accounting practices are constructive in nature, because they help an organization to make strategic decisions as concerns its well-being and business ventures. In addition, depending on the outcomes of an accounting exercise, organizations are able to determine their competitive advantage in the market, hence an important tool for formulating better business policies. These new business policies will ensure organizations increase their profits and beat competition, hence business well-being and diversity (Accounting p.1).

Another common feature of accounting is that, accounting takes a time span of one year, although in some organizations it may take half a year. It is important to note here that, it is the overall balancing of accounting books that takes one year, but daily organizations’ accountants must conduct balancing and recording of business transactions in terms of both inputs and outputs.

In most cases, accountants are permanent organizations employees, because not only do they participate in the yearly accounting exercise, but also they help in the daily business operations in terms of funds management and control. This is to say, accounting work commences immediately after bookkeepers finish their daily recording work.

There is also variations in practitioners in this field in that, accountants can be either chartered or not. However, all accountants must have valid licenses depending on a country’s working rules.

Auditing

Although almost the same to accounting, there exist many variations in terms of practice and time limits, hence differentiating it from accounting. Auditing generally is the assessment and authentication of an organization’s financial and accounting records. This process primarily aims to verify the accuracy of accounting records, hence a way of confirming an organization’s management policies are correct. After the confirmation of accounting records, auditors are supposed to correct the documents and present such reports to concerned stakeholders. Unlike accounting, auditing can be in two forms: firstly, an organization can use services of a consulting company, and secondly infosec specific (a mechanism that keeps records of all individuals who register into an organization and the nature business transactions they conduct) (Raffa pp.1-2).

For an auditing exercise to be successful, practitioners in this field (auditors) must have both accounting and auditing understanding. Auditors perform their exercise on past organizations records after accountants have conducted the normal yearly balancing, hence making it an analytical process. That is to say, the auditing process tries to analyze the truth in accounting books and other organizational practices.

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Another main factor that differentiates auditing from accounting is the time span of the exercise. Most organizations conduct auditing of their records any time so long as the accounting exercise is over. The whole exercise take varying time limits, ranging from one week to one month depending on an organizations size and business expanse.

Unlike accounting, auditing is a one-time activity; hence, auditors are independent individuals, who offer services to organizations, whenever stakeholders require accurate reports about such organizations, for example, when there are cases of frauds within an organization. In addition, due to importance attached to auditing, all auditors unlike accountants have a liability of assisting an organization prepare its final accounts.

Conclusion

In conclusion, although the two organizational processes have clear differences, they play the same overall role; assisting organization’s management teams make correct decisions as pertains business operations and practices. In this regard, these two processes are very crucial for any business, because they help to grade and position an organization.

Works Cited

Accounting. Investor Words. 2010. Web.

Raffa. Definition of auditing: levels of service. 2003. Web.

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BusinessEssay. (2022, February 11). Concepts of Accounting and Auditing. Retrieved from https://business-essay.com/concepts-of-accounting-and-auditing/

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BusinessEssay. (2022) 'Concepts of Accounting and Auditing'. 11 February.

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BusinessEssay. 2022. "Concepts of Accounting and Auditing." February 11, 2022. https://business-essay.com/concepts-of-accounting-and-auditing/.

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BusinessEssay. "Concepts of Accounting and Auditing." February 11, 2022. https://business-essay.com/concepts-of-accounting-and-auditing/.