The practice of accounting is comprised of the daily analysis, tracking and recording of an organization’s finances. This process includes consideration of simple balances such as costs owed to suppliers, pending profits due from customers as well as standard operational costs. Complex accounting metrics allow businesses to gauge their profitability and predict future sales forecasts. Accounting analysis also allows small businesses to determine cash flow for potential expansion.
An audit is the survey of an organization or business’s financial practices, inclusive of accounting procedures and financial documents as well as analysis of an institution’s conformation with established financial standards and regulations. Audits are conducted to evaluate a company’s financial status prior to sale or transfer to new owners, to make suggestions regarding potential areas of financial improvement or streamlining or to detect and prosecute for criminal negligence or wrongdoing in violation of local, state or federal financial laws.
Simply put, accounting is the analysis of finances and auditing is the analysis of that analysis. Many accounting experts can also be well trained in auditing procedures and vice-versa. In fact, many financial professionals seek training in both realms of study so as to be prepared for audits in the event they experience one while working in the accounting matters of a particular firm.
Organized Accounting and Quick Audits
Federal institutions such as the Internal Revenue Service audit businesses for a variety of reasons. In IRS audits, business entities small and large must prove to the federal government that the financial figures reported on their tax statements are correct. Maintaining well organized financial records through accurate accounting practices can potentially make the auditing process much easier for small companies.