Accounting vs Auditing

Question 1

Financial Accounting

Answer 1

The accounting focuses primarily on the preparation and distribution of the general-purpose, historical financial statements (balance sheet, income statement, statement of cash flows, and statement of retained earnings), which are representations of management.

Question 2

Auditing

Answer 2

The auditor’s primary role is to provide an impartial (independent) report on the reliability of management’s financial statements.

Question 3

Purpose of an audit

Answer 3

The purpose of an audit is to provide financial statement users with an opinion by the auditor on whether the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. An auditor’s opinion enhances the degree of confidence that the intended users can place in the financial statements.

Question 4

Applicable financial reporting framework

Answer 4

The financial reporting framework adopted by management and, where appropriate, those charged with governance in the preparation of the financial statements that is acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation

Question 5

Financial reporting framework

Answer 5

A set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements; for example: U.S. generally accepted accounting principles (GAAP), International Financial Reporting Standards (IFRSs), issued by the International Accounting Standards Board (IASB), or a special purpose framework.”