Auditing Expense Reports checklist

A comprehensive expense report audit checklist is vital for efficiently reviewing your employees’ business expenditure and preventing expense report fraud.

Auditing expense reports allow you to review documents and receipts submitted by your employees. These reports provide evidence that can be used to ascertain if expense claims are accurate and comply with your business’s policies - and ensure you are always audit-ready. 

Expense fraud typically occurs in one of two ways: human error or an outright submission of inaccurate expense reports. Your expense report audit checklist will foster a consistent, transparent and intuitive process that will prevent fraud - whether it’s an honest mistake or intentional - through effective expense report control.

Understanding the Expense Report Audit Process

Expense report audits identify red flags and suspicious patterns to uncover fraud, costly mistakes, and reporting inefficiencies. This process of matching receipts,to transactions and conducting investigations can be broken down into six stages: 

Establish your expense report audit process: determine your business’s capacity to review expense reports, so you can decide if you will audit all or a select number of reports. Then, choose how frequently you will conduct audits. For example, if you process a low volume of expense reports, monthly or quarterly audits might be sufficient.

Create your expense report audit checklist: ensure your expense report audit process is consistent and effective by creating a checklist of each relevant stage of the process. The checklist should be a dynamic tool that is reviewed and updated when necessary. 

Review expense reports: the first step during the review stage is manually matching receipts to expense report submissions. This will allow you to identify if the date, source, and total on the receipt match the report and to check that the reported purchases are permitted under your expense policy.

Identify red flags: typical red flags to look out for when matching receipts to reports include: the reported purchase does not match the receipt; the requested reimbursement is higher than the amount listed on the receipt; falsifying invoices or receipts and attempting to claim reimbursement for the same purchase multiple times. 

Investigate suspicious expense claims: question any transaction that contravenes your expense policy or pushes the boundary of being “reasonable”, such as personal expenses disguised as company expenses and disallowed travel expenses. Having identified any suspicious claims, communicate your concerns directly to the employee in question to determine if it was an honest mistake or fraud. If fraud is uncovered, conduct a thorough audit of every expense report the employee has submitted and flag with HR. If you discover that multiple employees are making the same mistakes, review your policies.

Evaluate expense policies: consider expense report auditing holistically to determine the effectiveness of your policies and whether they need updating. Evaluate how well employees comply with your policies, obtain/deliver proper authorisation, and adhere to submission timeframes. Use this to identify and address any friction in the audit process. For example, you might decide to automate expense reports by implementing innovative software.

What should an expense report include?

An expense report typically includes the following core information:

• Date the item was purchased - this should match the date on the related receipt.
• Who purchased the item
• Where the item was purchased
• The type of expense - such as meal, taxi, petrol, parking
• The total amount incurred (including tax) - this should match the amount detailed on the related receipt
• Subtotals for each category of expense
• The total reimbursement requested
• The account the reimbursement should be made to
• Additional notes

How do you audit expenses?

Traditionally, expense report audits have been conducted manually, with employees required to fill in spreadsheets or forms and retain physical receipts; while managers must sift through receipts and match them to reports. This laborious process is time-consuming and can lead to mistakes. 

Expense reporting software automates the management of expense auditing, and the benefits are compelling: reduces the risk of fraud and human error, limits the impact of lost receipts, saves time at every level of processing, provides faster payment of reimbursements, and offers a more efficient means of monitoring and managing expenditure. 

This, combined with a comprehensive expense report audit checklist, will help you achieve a more efficient, transparent and cost-effective audit process.