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3–13 AUDIT EXPENSE REPORTS Accounts Payable Best Practices
A labor-intensive task for the accounts payable employees involves carefully
reviewing every line item on employee expense reports, comparing everything to
the company policy for allowable travel or entertainment expenses, and then con-
tacting employees regarding inconsistencies prior to issuing a check. For a large
company with many traveling employees, this can be an extraordinarily labor-
intensive task. Furthermore, most employees create accurate expense reports, so
the labor expended by the accounts payable staff is rarely equal to the cost savings
all the review work generates. To make the situation more unbearable for employees,
the expense reviews take so long to complete that there can be a serious delay
before an employee receives payment for a check—especially if the expense report
is rejected due to reporting failures by the employee, resulting in the expense
report moving back and forth several times between the employee and the account-
ing department before it is paid. When there is so much document travel time, it
is also common for the expense report to be ‘‘lost in the shuffle,” meaning that the
employee may have to create the expense report all over again and resubmit it.
All of these factors result in an inefficient process in the accounting department
and lots of angry employees who are waiting for reimbursement.
The solution to this problem is to replace a total review of all expense reports
with an occasional audit. This approach involves taking a sample of many employ-
ees’ expense reports every few months and comparing the reported amounts to the
company travel and entertainment policy to see if there are any exceptions. If the
exceptions are significant, it may be necessary to follow up with additional
reviews of the expense reports of the same employees to investigate possible
abuse. The audit usually results in a list of common expense reporting problems,
as well as the names of employees who are abusing the expense reporting system.
There are several solutions to ongoing expense reporting problems:

• Employee education. It may be necessary to periodically reissue the company
policy on travel and entertainment, with follow-up calls to specific abusers to
reinforce the policy. This advance work keeps problems from showing up on
expense reports.
• Flag employees for continual audits. If some employees simply cannot cre-
ate a correct expense report, they can be listed for ongoing audits to ensure
that every report they create is reviewed for accuracy.
• Flag employees for complete reviews by the accounts payable staff. Some
employees may be so inept at issuing proper expense reports that their
reports must be totally reviewed prior to reimbursement. These problem
employees can be flagged during the audits.