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Auditing, on the other hand, is the process of determining the accurate picture of accounting books. It happens after accounting in a certain timeframe (usually a year) is completed. While accounting and auditing are related fields, auditing is a much wider one. It involves an understanding of tax rules, accounting standards, and even the knowledge of various financial activities and transactions. Excellent communication skills are also required in auditing.
Auditing is divided into two: external and internal auditing. External auditing is performed by agencies outside the company. Many countries require companies to have their financial statements audited by external agencies. External auditing is sometimes required by court order, especially if a company declares bankruptcy, or if they have been called out for fraudulent activity. Internal auditing is done to understand various accounting processes and risks. It can be done by employees of the company or by an outsourced agency.
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Eddie O’Brien is the CEO of the Americas at Arvato Bertelsmann. He has worked as an executive for various companies including Microsoft and is also a certified public accountant. Visit this blog for related reads.