{"id":2677,"date":"2016-07-14T23:04:47","date_gmt":"2016-07-14T23:04:47","guid":{"rendered":"https:\/\/www.peeriosity.com\/shared-services\/articles\/?p=2677"},"modified":"2022-07-28T18:47:23","modified_gmt":"2022-07-28T18:47:23","slug":"the-widening-gap-in-expense-report-auditing","status":"publish","type":"post","link":"https:\/\/www.peeriosity.com\/shared-services\/articles\/2016\/07\/the-widening-gap-in-expense-report-auditing\/","title":{"rendered":"The Widening Gap in Expense Report Auditing"},"content":{"rendered":"

With the introduction of sophisticated Travel Expense software<\/a>, complete with pre-populated expense line items, and automatic checks of merchant category codes (MCC)<\/a> for appropriateness; combined with the move from cash advances and the requirement to have all expenses on a credit card, the risk of loss due to errors or intentional fraud has been reduced dramatically.\u00a0 Yet, when you consider how the expense report audit process has changed, many are still performing extensive compliance audits of travel expense reports.<\/span><\/p>\n

There are a number of reasons cited for requiring frequent audits, including the policy of auditing all key employees. Because of their position in the company, it may not be as easy for another employee to review and challenge the appropriateness of expenses. Also, a glaring transgression risks embarrassment to the company, resulting in the board of director level exposure; an outcome that isn\u2019t fun for anyone, and particularly unpleasant for the organization responsible for expense report processing.\u00a0<\/span><\/p>\n

Another common reason for performing extensive T&E audits is related to compliance with Value-Added Tax (VAT) requirements.\u00a0 For companies carrying out significant operations in Europe, the amount of VAT recapture can be in the millions of dollars, which certainly gets the attention of management as they strive to make the company as profitable as possible.<\/span><\/p>\n

It\u2019s important to note that any audits by those responsible for processing the expense report are almost certainly duplicate reviews of expense reports that were approved by the traveler\u2019s manager.\u00a0 Obviously, the best point of control is a well-trained manager with budget authority for the expenses, who is motivated to ensure policies are followed and appropriate outcomes are achieved.\u00a0\u00a0 No one else is in a better position to deem expenditures as \u201cordinary and necessary business expenses\u201d.\u00a0<\/span><\/p>\n

Recently, Peeriosity\u2019s iPollingTM<\/sup> functionality was used to perform custom research in the Corporate Card research area<\/a> to understand the approaches that member companies take regarding the audit of expense reports.\u00a0 The results indicate that 25% of member companies\u2019 audit less than 20% of expense reports, with 54% auditing less than 40% of expense reports submitted for processing.\u00a0 Interestingly, even with many compensating controls in place, 19% of member companies are auditing 100% of expense reports.\u00a0 Here are the details:<\/span><\/p>\n

\"ipolling<\/p>\n

The follow-up question looked at the frequency of performing audits, with 71% indicating that they perform audits on a daily basis.\u00a0 The next most popular frequency was monthly at 14%, which implies that the audits are taking place after the expense reports have been processed with associated expenses reimbursed.<\/span><\/p>\n

\"how<\/p>\n

Here are a few of the comments from responding companies:<\/span><\/p>\n