Audit vs. Advisory – What is The Difference?
Table of contents
- Audit Overview and Roles
- Advisory Overview and Roles
- Choosing Your Path
Professionals in the accounting and finance fields are often faced with the decision between pursuing careers in audit or advisory. While audit and advisory both typically involve analyzing financial information and serving clients in some capacity, they each play different roles.
Audit Overview and Roles
The audit practice of accounting firms focus on independently verifying the accuracy and completeness of a company’s financial statements, reporting processes and internal controls. Key aspects of audit roles include:
- Gaining extensive knowledge of accounting standards, regulations, and financial reporting requirements
- Developing expertise around internal controls, risk assessment, and fraud prevention
- Testing processes and samples to validate financial statement assertions
- Identifying control deficiencies and areas for improvement
- Interacting with various levels of management to understand reporting processes
- Conducting detailed analysis of financial statements and disclosures
- Preparing audit opinions and presenting findings to key stakeholders
Auditors develop well-rounded technical accounting skills combined with business acumen. However, the scope of audit is limited to compliance and retrospective analysis.
Advisory Overview and Roles
Alternatively, the advisory practices of professional services firms aim to provide strategic guidance to drive business performance and growth. There is greater variety within advisory roles which may include:
- Mergers and acquisitions consulting – conducting financial due diligence, operational due diligence, commercial due diligence, valuation, tax M&A consulting, investment banking, etc. This can also be called transaction advisory or deal advisory
- Accounting advisory – financial process support, CFO services, financial reporting support, capital market support
- Restructuring – bankruptcy support, turnarounds, liquidity management, restructuring investment banking
- Data analytics – data mining, visualization, and statistical analysis
- IT – IT consulting, IT audit, IT risk assessment, implementing efficient systems and controls
- Forensics – investigating fraud, financial disputes, or allegations
- Risk management – assessing operational, technological, and cyber risks
- Strategy and operations – reviewing business processes, models, go-to-market strategies and performance
While advisory covers a diverse set of services, all focus on providing strategic insights vs. just validating accuracy of past results. Advisory roles require strong critical thinking, analytics, project management, and strategic planning abilities.
Choosing Your Path
Weighing your skills, interests, and career aspirations can help determine if audit or advisory is better for you. Key factors to consider include:
- Desire to specialize vs have broad exposure – advisory enables more focus while audit provides rotational experience.
- Interest in compliance vs driving strategy – audit ensures adherence to standards while advisory is more strategic.
- Risk tolerance and desire for change – advisory tends to involve newer solutions with audit providing steady assurance services.
- People management aspirations – advisory includes more managerial opportunities earlier on.
- Mindset around business – advisory requires a more entrepreneurial approach.
With distinct characteristics, audit and advisory offer different professional growth paths to leverage your talents in accounting and finance. Assess where you can maximize your strengths to determine the best role for you.
Interviewing for FDD Jobs?
Practice makes perfect. The best way to prepare for an FDD interview is to practice. First, you will need to nail down your understanding of the process and goals of financial due diligence. Next, you will need to learn how to analyze a business with an eye toward identifying red flags and potential quality of earnings adjustments. Finally, you will need to work on your ability to present your findings in a clear, concise, and confident manner.
Leverage our free resources or complete financial due diligence interview guide to help you prepare for all of these items