Nothing sends chills down a business owner's spine, quite like being notified that you are being audited. The worry that you have accidentally overlooked something critical or done something incorrectly can be extremely nerve-wracking. Furthermore, trying to understand why you are being audited can cause business leadership to fret from the very beginning. Even before the audit has begun, the entire process can be confusing and stressful.

Preparing for and weathering an audit is a lot of work for business owners that likely have too much on their plates already, especially when the audit is dragging on. Therefore, it is crucial to have an accountant (especially a CPA) or consulting CFO to lean on throughout the audit process, no matter how long it takes. But if your audit seems to be taking longer than it should, it is essential to understand what the hold up is to mitigate your future audit risk.

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.  
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Furthermore, exercising extra caution around common problem areas protects the integrity of financial reporting, ensuring that the business’ 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.
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Billing fraud primarily occurs in one of three ways, when employees:

1. Submit fictitious invoices for a vendor that does not exist (also known as a “shell company scheme”)
2. Inflate invoices for a real vendor that is unaware of the fraudulent activity occurring
3. Invoice the purchase of personal items

​While employees may justify their illegal actions due to need or entitlement, billing fraud ends up costing small businesses billions of dollars every year.