During an audit, financial inaccuracies are typically uncovered that have broader business implications. Whether these inaccuracies are the result of fraud, mistakes, or ignorance, they can have deleterious effects. Internal audits may unearth problems that negatively affect financial statements and financing attempts, while federal tax audits can identify issues that result in costly fines and penalties.
Understanding which inaccuracies auditors find most often provides a foundation for self-imposed accountability. Focusing on areas where problems typically exist equips business owners with the information needed to improve financial accuracy and make smarter business decisions.
Furthermore, exercising extra caution around common problem areas protects the integrity of financial reporting, ensuring that the business’s financial position will be accurately represented to potential investors, existing shareholders, and state and federal authorities.
Billing fraud is the most common type of fraud that small businesses experience, accounting for 27% of all fraudulent activity.
Billing fraud primarily occurs in one of three ways, when employees:
While employees may justify their illegal actions due to need or entitlement, billing fraud ends up costing small businesses billions of dollars every year.
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