Professional Documents
Culture Documents
Plug
Plug
Definition
The most basic definition of a plug may be "a placeholder number which is used in an overall
cost or budget estimate until a more accurate figure can be obtained".
Plugging has been described as "the use of false numbers in financial ledgers that forces
balances, and effectively masks accounting errors and control deficiencies".
Consequence
Plugging will make an analysis unreliable, resulting for example in a flawed ratio
analysis, performance analysis and other attachments on a financial model like equity
valuation, budgeting and loan appraisal, and debt structuring.
Dependence on plugging has been described as "indicative of a dysfunctional finance and
accounting system".
Examples
Accounting malpractice at the US Defense Department was investigated in 2013 by Reuters. At
the Defense Finance and Accounting Service (DFAS) superiors ordered accountants to make
unsubstantiated change actions and enter false numbers. In the Cleveland DFAS office,
unsupported adjustments to make balances agree totaled $1.03 billion in 2010 alone, according
to a December 2011 General Accounting Office report.