Cost Recovery Audit Key Terms

Begin the process of reclaiming your money by learning cost recovery audit vocabulary

Over the course of a company's lifetime, its books can grow more and more complex. It is to a business' benefit to keep consistent records; otherwise, you will risk overpaying vendors or government taxes. Depending on the company, a cost recovery audit can be done in-house or outsourced to one of the many firms that handle various account recovery procedures.

 

Data cleansing

If a company does not have confidence in its own numbers, there is little hope a recovery audit will be effective. Data cleansing essentially means cleaning up the books, which involves getting rid of duplicate entries and standardizing notations.
Try: Automated Auditors outlines its data cleansing services.

Accounts payable (A/P) audit or overpayment audit

An accounts payable audit can encompass tax overpayment and duplicate payments, and can even detect employee or vendor fraud. Companies that have a complex accounting system might not have time to go back and check for overpayment errors, in which case an A/P audit service would come in handy.
Try: Cost Recovery Solutions outlines its A/P audit services.

Fraud audit

Some A/P audits specifically target fraud, either on the part of employees or vendors. An A/P fraud audit could detect stolen checks, unusually large vendor payments, or payments that fall just below the amount where approval would be required. The process also weeds out fake vendors.
Try: The American Institute of Certified Public Accountants outlines changes to its fraud audit standards.

Benford's Law

Benford's Law is named after Dr. Frank Benford who discovered that, in any given data set, the odds that 1 will be the first numeral are 30.1 percent. This astonishing finding has been used to weed out fake or fraudulent accounting data.
Try: EZ-R Stats explains how Benford's Law can be used to detect fraud.

Contract compliance audit

Before you enter into a contract, great care is taken to negotiate the terms and get the best possible price. But if there is nobody to follow up on the complex payment schedules and rebates, you may be losing money, not to mention violating government regulations.
Try: Moody Associates, P.A. outlines its contract compliance audit services.

Sales and use tax audit

If you aren't careful, you might be overpaying state sales and use taxes. An experienced auditor will represent your company to a state tax agency, and comb your books to see if you have overpaid.
Try: Weisman and Associates can conduct a sales and use tax audit as part of an A/P audit or separately.

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