Travel and entertainment (T&E) expense represents significant spend for most companies. Benchmarks estimate that total T&E expenses are as high as 12% of a company’s annual budget. Due to this large expenditure, T&E also carries a high risk of fraud and abuse. When you combine a high percentage of spend and a high risk for fraud and abuse, you have an area ripe for audit, which is why most audit departments will include a T&E review in their annual plan.
Many audit departments follow a standard audit program for T&E, often testing a sample of transactions for adherence to the T&E policy. Some audit departments will analyze all transactions for a sample of employees, such as top spenders, while others analyze all transactions for a sample of months from the year. The question is, with such a significant portion of your company’s resources going to T&E expense, is sampling the best approach? The answer is simple, no. When we rely on sampling, we can only identify exceptions in the transactions selected, and we risk missing material violations to the policy. As auditors, we should use data analytics to analyze 100% of transactions whenever possible.
When building an effective audit analytics program for T&E expense, there are two objectives to consider:
- Identify policy exceptions
- Gain an understanding of behavior/culture within the organization
