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Accounting vs Auditing

“Accountant” and “Auditor” are often used interchangeably, but are they really the same thing? An audit is typically performed by a Certified Professional Accountant or CPA, and audit is taught in all AASCB-accredited accounting programs. You could consider auditing to be a type or sub-field of accounting, but in practice, the two look very different.

At its most basic, accounting can be defined as a system for organizing and recording a business’s or other entity’s finances. Of course, accounting gets vastly more complicated from there. Different governing bodies such as the AICPA and the FASB, determine the accounting practices for different organizations and situations. Who can do it? The term “accountant” isn’t regulated, so anyone with that job title can call themselves an accountant, even without any formal accounting education. The title of CPA, however, is highly regulated, requiring graduate-level education, a challenging four-part exam, at least two years of practice under other CPAs, and continuing education. Different businesses and positions will require different amounts of expertise. For senior accountant positions and beyond, most companies want CPAs.

While several other types of audits exist, the most common are internal and external financial audits and IRS tax audits. Contrary to popular belief, financial auditors aren’t primarily looking for instances of fraud when they audit a company. While discovering fraud is sometimes a part of the job, the external financial auditors’ role is to help provide reasonable assurance that a company doesn’t have what’s known as “material misstatements” in their financial reporting.

External audits result in a professional audit opinion, in which users of financial statements, such as potential investors or lenders, are confident that the financial statements are accurate. Internal audits are performed to help management identify areas for improvement in their company’s internal controls and compliance with relevant regulations. While non-CPAs (such as interns or staff accountants working towards their CPA) can assist with an external audit, the professional audit opinion must always come from a CPA. Additionally, external auditors must be independent in appearance and fact, meaning they can’t have any conflict of interest such as investing in or accepting gifts from the company they are auditing.

Tax audits are performed by the IRS to determine the accuracy of a business’s or individual’s tax return. Auditors will examine a taxpayer’s current and past tax returns as well as any relevant documents and financial records. Who can perform them? Of course, IRS audits are performed solely by agents of the IRS. While standards vary, the IRS usually requires at least some hours of accounting education for entry-level positions and graduate-level education or a CPA for senior-level positions.

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