Accounting is a necessity and auditing is a luxury?

Accounting is basically a service function that embraces the formal design, installation, and operation of a system of accounts in order that business transactions maybe properly recorded and reported. It is usually called the language of business, and an "aid to management".

It is therefore clear that Accounting is a NECESSITY in all kinds of business specially big companies, whether a single owner or a corporation. ( non-profit or profit ) Even a family, father, mother and older children needs accounting to check their incomes and expenses.

Who needs accounting information, mainly the financial statements ( The Balance Sheet or Statement of Condition, and the Income Statement or Statement of Operation ) to safeguard their interests? We have the 1. Management, 2. Creditors, actual and prospective, 3. Investors, actual and prospective, 4. Stockholders, 5. Empoyees, unions, 6. Regulatory and taxing authorities, etc. The reasons are self explanatory.

Auditing is actually a part of Accounting. It is a specialized area that deals with the examination and review of the accounting records mainly, to find out the effectiveness of the accounting internal control systems and procedures and also, management policies and practices. In short not only finding errors and fraud, but to effectively assist management to avoid or reduce such occurrences. We have internal auditors (co. employees ) and external auditors ( generally CPA's ) with the objective of forming an independent opinion as to the fairness, and consistency of the Statements of operation and condition of the company.

Based on above informations, we can therefore conclude that Accounting, with Auditing systems is necessary in business and guides management in the effective implementation of its policies and procedures for the success of the company