Accounting Firms or CSP’s offer a wide range of services, from basic accounts or bookkeeping to more complex functions, such as advisory, tax returns and audits. A Corporate Service Provider (“CSP”) as opposed to an accounting firm is an entity that additionally carries on company administration and is licensed to act as a company secretary, corporate director or officer of a company (their client).
While most Accounting Firms, Sole Practitioners or CSP’s offer, inter alia, accounting and bookkeeping services, audit services are not always provided by the smaller entities, firms or practitioners. The increased focus on auditor independence of the last few decades has ensured that audit services require a form of high-level accounting and sophistication, emanating from the true professional which calls for a much higher salary bracket than the smaller entity can afford.
An entity must set up an accounting system in order to record financial data and measure the overall performance or profitability of its business activity. Thus engaging the services of an accountant as a resident employee or on an outsourcing basis through an Accounting Firm or CSP is essential although not mandatory. The advantage of outsourcing bookkeeping or accounting services is that the cost is often less than that of an employee.
An Audit on the other hand, is perceived as the necessary evil because every company registered under the Companies Act, 1995 or a Limited Liability Company is required by law to present audited accounts or financial statements annually, hence the term statutory audit.
Accounting and auditing are both essential business functions which, while distinctly different concepts, often correlate. Accounting is the systematic recording and maintenance of a company’s financial data and transactions, executed by the processing of entries or “posting” of all financial events in individual accounts. Accountants routinely construct financial statements, such as balance sheets and income statements, to provide internal and external stakeholders with an insight into a company's financial situation.
Auditing, on the other hand, is the process of reviewing and investigating any aspect of a business, whether financial or nonfinancial. Auditors are fully trained to spot areas of needed improvement, potential dangers and incidents of unethical conduct in the company’s modus operandi. The audit process is an in-depth examination of each financial transaction made by a company to ensure that all necessary accounts are present and maintained accurately and in a timely manner. It is also a review of the financial statements and the processes used to prepare financial statements. Other issues, audits can review, are human resources policies, operational procedures and quality or safety policies. Upon the completion of the full independent audit, the books and accounting systems and procedures are verified as accurate. A certified practitioner or firm will then opine that the Accounts give a true and fair view of the state of affairs of that Company at a point in time.
Several differences exist between accounting and auditing. One important difference is that the audit checks the accounting process to determine its validity and accuracy. The most significant, however, is that accounting is a daily process, whereas an audit is usually conducted annually (annual), six monthly or quarterly (interim audit). So whilst accounting is an ongoing process, it is performed in real time in comparison to an audit which is conducted on past activity or transactions and is essentially “historical” in nature. Another difference is that, the accounting is generally done by the employees on the company’s payroll (internal accounting) or outsourced through a professional firm against financial reward, i.e. tied to a monthly retainer in monetary terms (client accounting). An audit, in contrast, is done by an independent body or practitioner with no ongoing financial ties to the company (external audit).
The similarities between accounting and auditing are that both require a thorough knowledge of accounting procedures and standards of practice. An auditor will essentially be an accountant first whereas an accountant is not necessarily an auditor unless this route of specialization has been chosen. Furthermore, both the accountant as well as the auditor are first and foremost, qualified and certified professional accountants and ultimately have one goal; which is to ensure that the company's records accurately reflect its financial position.
The question that begs here is, why accounting remains the preferred career of choice when a candidate is presented with either opportunity from a recruitment perspective? This question and more will be tackled in the next article of this series.
View the full list of Accounting job opportunities here.
Finance & Legal Recruitment Specialist