Which Audit Report to Rely On

Post by Larry Beebe

A U.S. District Court of Appeals for the 7th circuit had to decide which audit of an employer’s payroll reports to rely on. An audit report by the funds showed the defendant owed 1.8 million to the funds. An audit conducted internally by the defendant showed the funds had been overpayed by 1.2 million. The auditor of the funds calculated underpayments but ignored overpayments. The court decided this was proper defense it was the burden of the defendant to prove the validity of the overpayments. The court accepted the fund auditors report.

It said the defendants audit was unreliable because:

  • It was done in the house rather than by a professional firm
  • The person doing the in house audit had no relevant experience
  • The in house audit did not explain the assumptions it made nor did it say why it differed from the report prepared by the professional firm

(No. 16-2037, 7th Cir. December 21, 2016)

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