When a company needs to get a financial statement audit of its records for a bank or its shareholders but doesn't really want to pay the full price or is afraid there may be material errors in its financial statements. A Fauxdit is normally performed by a small-medium public accounting firm that doesn't know what it's doing.
CEO: Our bank requires that we get an audit done to make sure we actually made $200 million last year. I'm afraid they might actually find something when they go digging, and we don't need another expense to worry about this year.
CFO: Well, we could get a fauxdit done. They'll sit in a side room, charge next to nothing, and they'll probably be content just seeing that our internal spreadsheets tie to themselves and to the financial statements. I'm virtually certain they won't even notice that our balance sheet doesn't balance. It will also cost way less than an audit and we will get the same report.
CEO: Good. Hopefully the bank doesn't notice.