What does teeming and lading in purchase ledger fraud refer to?

Teeming and lading is a term used to describe a fraudulent scheme in financial transactions, particularly in the context of the purchase ledger. It refers to the act of using funds from one supplier to pay another, effectively creating a cycle of fraudulent payments that misappropriates funds. This scheme can lead to significant discrepancies in financial records because it obscures the actual flow of money and can create the illusion of settled debts or sufficient cash flow when it is, in fact, manipulated.

In this case, the correct choice highlights a common method of committing fraud within the purchase ledger. It demonstrates how one supplier's funds can be misused, damaging the integrity of financial statements and misleading stakeholders about the true financial health of the entity.