What is Accounting?

Accounting is a specialized business language that helps understand an entity�s

economic activities. It captures and categorises a company�s daily monetary
transactions into different groups. With that, transactions are summarized to be
easily viewed in an emergency and then analyzed and understood. Financial
statements and finally communicate the results to the interested parties.

he primary task of accounting is to provide helpful financial information for the

organization and management. Cost accounting, management accounting, tax
accounting, financial accounting, human resources accounting, and social
responsibility accounting are the areas of accounting.

What is an Audit?

An audit is a systematic procedure intended to independently examine an entity�s

financial information to express an opinion on its accuracy. The organization
refers to all entities regardless of size, structure, nature, and form. It is a
material and objective investigation of all aspects of a transaction. That is,
financial statements, vouchers, receipts, accounting records, and related documents
are examined to discover the validity and reliability of the financial statements.
In addition, errors, fraud, intentional manipulation, usurpation of accounts, etc.
They can also be detected by close inspection.

Conclusion

Both accounting and auditing are essential and fundamental for every organization
and play a decisive role. However, the scope of auditing is broader than
accounting. It requires in-depth knowledge of tax laws and regulations, accounting
and auditing standards, and good communication skills.

In addition, confidentiality, integrity, honesty, and independence must be observed

in audit procedures. The reports presented by the auditors benefit the users of the
financial statements, such as creditors, shareholders, investors, suppliers,
debtors, clients, governments, etc., to make reasonable decisions

What Are The Functions Of Accounting?

The functions of accounting include the systemic tracking, storing, recording,

analysing, summarising and reporting of a company's financial transactions. Through
the functions of the accounting department, the company can maintain a fiscal
history that they can make accessible for audits. They can also use it to prepare
reports, create budgets, reduce costs, increase profits, avail growth
opportunities, assess future expenditure requirements and make financial
predictions.
The basic functions of accounting in a company may include the following:

Keeping financial records: Accounting helps businesses maintain an accurate and up-
to-date record of the day-to-day financial transactions of the company, such as
supply purchases, product sales, receipts and payments.
Monitoring financial transactions: Accountants may track multiple financial
transactions related to payments due to the company to ensure it receives the
revenue and remains profitable.

Making bill payments: Accounting involves checking invoices to ensure the

legitimacy of the charges, setting payment dates and paying the bills that the
company owes to various vendors and suppliers.

Paying employee salaries: Companies can use accounting to make payroll payments
from company funds, manage employee benefits and issue employee work-related
bonuses.

Keeping digital records: Accounting may involve creating, maintaining and updating
digital accounting systems to store and calculate the company's financial data.

Writing financial reports: Accounting involves repairing detailed quarterly and

annual financial reports about the company's assets, profits and losses for
internal and external stakeholders.

Maintaining fiscal history: Accountants assist with creating, documenting and

storing the fiscal history of the company's transactions and making it available
for audits and assessments.

Achieving business goals: An accountant can analyse financial data to formulate and
implement comprehensive financial policies and strategies to advance the company's
business goals.

Preparing budgets: The accounts department may reference the company's financial
data to prepare the overall company budget, the department budgets and the project
budgets.

Making financial projections: Accounting involves analysing the company's available

financial resources, expected revenues and business goals and using this
information to predict future business expansion and growth.

Auditing finances: Accountants may conduct financial audits of the company,

identify accounting discrepancies and implement corrective solutions.

Assessing financial resources: Companies can use accounting to identify the

financial weaknesses and strengths of the organisation, determine how to counter
weaknesses and boost strengths and implement appropriate strategies.

Reviewing performances: Accounting involves performing regular financial reviews of

the company's departments to assess their performance and make changes to reduce
waste, increase productivity and streamline expenses.

Complying with legal requirements: Accountants make sure the company complies with
industry and government rules, regulations and policies related to taxation,
financial reporting and employee wages.

Preventing mismanagement: The accounting department can keep accurate track of the
company's financial transactions to ensure no mismanagement or wastage of money
occurs in the company.

Ensuring vigilance against fraud: Accounting includes implementing strong security

measures to protect the company assets against data breaches and internal and
external fraud.
FUNCTIONS OF AUDIT :-
Following are the important functions of audit :

1. Study The Accounting System :-

It is the basic function of auditing. In order to determine the nature, timing and
extent of the audit procedures auditor should study the accounting system.

2. Internal Control System :-

It is a process which determines that management policies are carried out according
the accounting principles. This system is very useful to safeguard the interest of
the enterprise. The auditor determines the effectiveness of this system.

3. Vouching :-
This function is essential to determine the accuracy of accounting record. Through
audit those documents can be checked which support and prove the business
transactions. All entries in books of accounts are made on the basis of relevant
vouchers.

4. Verification Of Assets :-
It is the function of auditing that it should verify the assets of the business. It
is concerned with the determination of value, ownership and possession of business
asset. The auditor can check the existence of asset.

5. Legal Requirement :-
It is the function of auditing to verify that statements are prepared under the
legal requirements or not. There are various laws like company and income tax
ordinance which are introduced by the govt.

6. Liabilities Verification :-
The liabilities of the business can be verified from the books of accounts. The
auditor can write a letter to the creditors for the verification of liabilities.
The auditor must receive the certificate from the management in this regard.

7. Capital And Revenue :-

Auditing should make difference between capital and revenue items. The capital
items are compared to note the financial position of the business. The revenue
items are compared to determine the income. The income and expenses related to many
years can be divided in current and coming year.

8. Valuation Of Liabilities :-
Through auditing value of liabilities can be checked from the books of accounts and
other papers. The auditor can also confirm the value from outside sources. The
value of liabilities is given in the balance sheet by the management but it is the
function of auditing which confirms this value.

9. Valuation Of Assets :-
The management gives the value of assets and auditor can apply the accounting
principles to assess the value of assets. The auditor critically examines and takes
help from the expert.

10. Reporting :-
Auditing important function is reporting. Auditor is an independent person and it
is his duty to submit his report in writing. If he is satisfied he can present
clean report otherwise he can give qualified report.