Difference between Taxes and Audit
Taxes and audits are very important concerns, particularly in the world of finance and business. Integral aspects of any business organization, taxes and audits may be important to individuals as well. In this comparison article, we take a look at the key characteristics of each.
Definition
The term "tax" refers to the imposition of financial charges or other costs on taxpayers, which may be individuals or legal entities. Failure on the part of these entities to pay taxes is an offense punishable by law. Taxes may also be imposed by organizations on a sub-national level. These come in the form of direct taxes or indirect taxes, and may be paid off in cash or labor.
An audit is an evaluation of an individual, an organization, or virtually any undertaking. The term is most often used in reference to accounting, but it may also apply to quality management efforts with regard to various tasks.
Methods
In its most modern form, taxes are collected in money, although in certain transactions, these are paid off “in-kind”. These collection methods are more prevalent in traditional and pre-capitalist states. In most countries, tax collection is performed by government agencies.
An audit is an essential aspect of accounting. These were traditionally undertaken as a means to gain information with regard to financial systems and the records of specific companies or businesses. In more recent years however, the term has been applied to tasks that dealt with determining safety, security, performance, environmental concerns, and various other non-financial applications.
Purpose
The funds that come from taxation are used for various purposes throughout history. Taxes have been used to fund wars, enforce law and public order, protect property, development of infrastructure such as road and buildings, and even to fund the production of legal tender. Taxes have also been used to fund welfare and public work services such as educational and health care systems, unemployment aid, and care for the elderly.
Audits are typically performed in order to determine the validity of specific information. I may also be used to evaluate the inner workings of a system. In any case, the basic goal of an audit is to formulate an opinion on an individual, an organization or a system, based on data gathered during a series of tests.
It is important to note that audits can only provide assurance that the statements are free from error within reason. This is why audits commonly employ statistical sampling as well.
Compare and Contrast
Tax
- The imposition of financial charges or other costs on taxpayers
- May be levied on individuals or legal entities
- May also be imposed by organizations on a sub-national level
- Come in the form of direct taxes or indirect taxes
- May be paid off in cash or labor
Audit
- An evaluation of an individual, an organization, or virtually any undertaking
- An essential aspect of accounting
- In more recent years, the term has been applied to tasks that dealt with safety, security, performance, and other non-financial applications
