I keep hearing this term from my accountant friend and have absolutely no idea what it means. I tried googling it but that just left me even more confused than I was.
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As an example of how it is useful, let’s say an accountant is crooked and embezzling money from the company. Every time the company needs 10 chairs, the accountant orders 10 chairs, but then writes down twenty chairs were ordered, pays two invoices- one for 10 chairs from the chair company, one for 10 (imaginary) chairs from the accountant’s wife – this means $5000 stolen from the company each time. Or people claiming overtime they never worked. Audits make running these things much harder and catches a lot of these swindlers.
For example, if someone is running the cash register, they might be taking money out of the drawer, or they might be applying coupons but charging the customer full price (and pocketing the difference) , or they might be giving discounts to their friends… A good audit can catch these sorts of theft as well.
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