Accounting involves capturing, summarizing, classifying, and analyzing the financial transactions of an entity, be it an individual or a business. For a business, it can be done by employees of the company or the company may hire the services of accounting firms in Singapore.
On the other hand, auditing involves an analytical and severe examination of financial statements and records of a business.
Auditing is done by a different entity where a company needs to hire the services of an auditor or audit firm in Singapore for an unbiased and fair opinion about the reliability and authenticity behind their financial statements. Basically, an auditor reviews the work of an accountant and it is obligated by law. Auditing is also necessary for correct business valuation.
What are the Similarities?
Accounting and Auditing are often used interchangeably and the similarities tell us why:
- Both accountants and auditors require in-depth knowledge of basic principles about accounting and different branches of it including cost accounting, financial accounting, management accounting, and more
- Both are usually done by people with a degree in accounting
- Both use similar procedures like computation, bookkeeping, and analysis
- Accountants are generally professionals who are employed and under the payroll services of a company. Auditors usually don’t have any financial connections with the company and hired from one of the many audit firms in Singapore to verify and assess the accuracy of the accountant. They are hired from outside for transparency and maintaining regulations.
- While accountants and auditors both hold a Bachelor’s degree in Accounting, public accountants who act as auditors need to be registered with the ACRA (Accounting and Corporate Regulatory Authority)
- While accountants may have a different approach to bookkeeping methods and making the balance sheet, auditors are mandated by law to carry out audits according to the SSA (Singapore Standards on Auditing). The ACRA inspects audits conducted by auditors to ensure SSA compliance. In Singapore, SSA is the equivalent replacement of International Standards on Auditing.
- Auditor’s responsibility starts where the accountant’s end
- Auditing is a periodic process while accounting is a continuous and regular recording of financial transactions
- While accountants can be employed by the HR or management level personnel of the company, auditors are hired by the shareholders. Likewise, the accountant report their deliverables to the management, while auditors report their findings to the shareholders
Is there any Audit Exemption?
In Singapore, Audit Exemption is given to entities who fulfil the criteria of being a small company. After revision to The Companies (Amendment) Act 2014, this concept was introduced for incentivizing small businesses.
To meet the definition of a “small company” under the Act, at least two of the following criteria is needed to be met:
- Total annual revenue of the company must be within the upper limit of $10 million
- Total assets of a company for the financial year must not exceed more than $10 million
- At the end of the year, the company must not have more than 50 full-time employees
Private companies that are able to meet these criteria don’t need to have their accounts audited. Apart from private companies, group companies can also avail audit exemption as long as they meet two of the above-mentioned criteria and qualify as a “small group”.
In a Nutshell
Accounting and auditing have plenty of similarities with the major one being similar educational qualifications. However, these are used by different groups for different purposes and can also complement each other quite well. Accountants may learn a lot from the professional expertise of an auditor and carry out the best accounting practices while auditors can learn technical aspects of a company and its accounting system from the accountants. For more information, visit our website.