The audit lottery is a sort of slang or joke term referring to a person who is doing something illegal or just incorrectly in regards to their finances. They stand to gain money by doing it the wrong or illegal method; however, if they are audited, they stand to lose much more than they gained. Some people know the risks and still take the path that leads to more money immediately, these people are playing the audit lottery, they're betting they won't be audited. If they're not a company they'll probably win that lottery.
I'll give only a couple obvious examples to explain the further, I don't want to encourage anyone to lie on tax forms. The easiest example I can think of is to claim you donated money to a charity. You can write off donations but if you get audited and you don't have a receipt you can be heavily fined. Someone would also be playing the audit lottery if they made the donation, wrote it off, but failed to keep the receipt, this is not illegal but you're taking the same risk. Another example is having your employer pay you 'under the table', for the straight and narrow 'under the table' means being paid in cash and without record. You may be audited one day and the auditors are going to wonder how you can afford a nice car and a place to live without any income. The advantage to this second example is of course that you completely skip out on income tax.
Most people who play the audit lottery will get away with it, in this case the 'winner' of the lottery is actually the loser.
