| Background | | | | accountancy. There are a number of professional |
| Accounting has been defined by the profession as | | | | bodies who represent accountants, the most |
| "The art of recording, classifying, and summarizing, | | | | important being Chartered accountants (ACA), |
| in terms of money, transactions and events which | | | | Certified accountants (ACCA), Management |
| are, essentially, financial in nature, and interpreting | | | | accountants (ACMA) and, in the US, Certified |
| the results accordingly." | | | | Public accountants (CPA). |
| Accounting relates to the dissemination and | | | | A completely separate branch of accounting is |
| measurement of financial information by | | | | that of Auditing. An independent auditor who |
| accountancy professionals to establish the level of | | | | examines the financial statements, in the form of |
| performance of an organisation. The culmination | | | | financial accounts, and accounting records of the |
| of such analysis is the preparation and production | | | | organisation with whom he is conducting the audit, |
| of a set of financial accounts representing | | | | is called an external auditor. The purpose of such |
| company performance in the previous twelve | | | | an audit is to provide an independent record of |
| months. | | | | the fairness and accuracy of the accounting |
| The accounting function is normally divided into | | | | statements in accordance with laid down |
| three separate branches: | | | | procedures such as, in the US, the Generally |
| The Financial Accountant prepares and analyses | | | | Accepted Accounting Principles, also known as |
| the financial data necessary for the decision | | | | GAAP accounting, and elsewhere, in accordance |
| makers within a business organisation. In the case | | | | with International Financial Reporting Standards |
| of public companies, such information, in the form | | | | (IFRS). |
| of financial accounts, is made available for public | | | | Some companies believe in auditing themselves, |
| scrutiny. | | | | apart of an external audit, in order to provide |
| Management accounting, by contrast, is | | | | ongoing financial information specifically for use by |
| associated with the flow of company information, | | | | management. Such internal auditors are normally |
| and is normally confidential in nature and available | | | | employed by the company itself. |
| only to a select group of individuals, such as board | | | | The financial reports, especially the annual |
| members and accounting management. | | | | accounts, are not only used for the benefit of |
| Further, companies pay corporation tax and | | | | company management, but are also invaluable to |
| individual employees pay income tax and national | | | | external groups, such as shareholders, creditors |
| insurance, and it is necessary to produce this type | | | | and the banks. The preparation of the various |
| of financial information for the relevant tax | | | | accounting reports, necessary for any business, |
| authorities. | | | | relies implicitly on the day-to-day production and |
| Accountants are accounting professionals, | | | | dissemination of financial information generated by |
| representative of these three branches of | | | | way of double-entry bookkeeping. |