What are Accounting and Auditing?
In order to understand business finance, it’s crucial to learn about accounting and auditing; the difference of these concepts, as well as the correlation between them. While a small business owner has to set up an accounting system before starting up, auditing is commonly reserved for a more established or larger business.
Accounting is the essential business function and a process of recording financial data, as well as storing and presenting them. An accountant maintains complex records of every financial transaction, such as revenues, costs and expenses. This cycle starts with a transaction receipt or any similar original financial document. Nowadays, accountants use a software program to make entries for all financial transactions in individual accounts. Using stored information, an accountant constructs financial statements, such as income or balance sheets to provide stakeholders with glimpses into a financial situation of a company.
Auditing is another essential business function. It’s the process of investigating and reviewing all business aspects, both financial and non-financial. An auditor is skilled and trained to spot areas that need improvement, incidents or potential dangers of unethical conducts etc. In general, audits may disrupt the normal flow of work in an established company, but the opportunity to spot and address all the potential weaknesses surely outweighs a temporary loss of productivity. Audits can review a wide range of issues including human resources policies, safety and quality policies, operational procedures, accounting audits etc.
When performing the auditing or accounting function, a business can depend on itself or seek outside guidance. If you own a small business (or even a large one) you can benefit from relying on a 3rd party accounting company. In case of larger businesses, hiring an outside auditing firm (check out business auditing services Singapore) has many advantages. In fact, publicly traded corporations must obtain 3rd party audits on a regular basis.