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What is an internal expense audit and should my business do it?

Internal auditors usually provide an unbiased and objective analysis of business activities and operations.

It is not uncommon for large corporations to have a dedicated internal audit team that continually monitors various business aspects, including employee expenses.  

However, not all organisations can afford to maintain a whole department. Small and medium enterprises tend to share some internal auditing tasks amongst managers, who, while not a dedicated team, should also ensure that employees are included in their expense audit process. 

In our article, we'll look at the internal expense audit, and make a case for why your business needs this, regardless of its size.

3 minutes

Posted 08/02/2023

Why should your business be auditing expense reports?

Although expense transactions may not seem like a huge deal in terms of their presence in the Profit and Loss Statement, their administration, processing, and ongoing reimbursements involve many hidden costs, which could skyrocket if not addressed.

Furthermore, even though the employees generally have the best intentions, many things could and frequently do go wrong, which may indirectly affect various parts of your business. 

Internal vs. external expense audit procedures 

Expense internal audits are performed differently from an accounts audit done by external auditors. A manager or team member would need to evaluate the actual expense claims to ascertain how closely they align with the expense policy. If certain expenses seem out of the ordinary, further checks may be required, such as a review of the supporting documentation, most commonly receipts. 

The premise of such an internal audit is not to penalise employees for some supposed complex expense fraud but to assess and, if needed, improve the end-to-end process, including communication, entry, submission, approval, bookkeeping, reimbursement, and reporting.

It may just be that current processes lack effectiveness and are costing the business more money and draining the time of your staff and finance team. Therefore, a periodic internal audit of the expense claims is a good idea and may help identify areas requiring improvement. 

Your expense process may need an update 

The expense claims process is only as effective as the guidelines provided in the policy. If the policy is laden with jargon and complex ifs and buts, it will be hard for employees to follow.

To minimise the chances of policy compliance being the problem area, we recommend updating it yearly with clear wording and detailing distinct types of expenses. 

An internal audit can help identify areas where your current expense practices are lacking and where effective communication, software, and processes can be improved. 

Read our blog, 'The Best Expense Policies have these things in common' for even more inspiration.

Bulk processing may be hampering accuracy 

If the organisation does not set time limits, some employees may include many unrelated expenses in a single claim after many months.

In this case, the approver would likely be less able to scrutinise a large number of line items and a folder of invoices closely, resulting in things being overlooked. The entry in the system, therefore, may have errors. 

Your expense claims may be increasing 

Sometimes, processes lose their effectiveness when the circumstances change. A fundamental overhaul of the processes may be required. The approvers or bookkeepers may not be able to stretch their bandwidth to deal with an increased number of expense claims. 

Extracting the relevant data from manual expense claims and reviewing paper receipts would be a mammoth task, which may be one of the reasons why an internal expense audit is put off. With an automated expense system in place, the data would be much easier to sort, and backing documentation would be a breeze to sift through. 

So, what’s the solution? 

Cloud-based expense management software, like Access Expense, can not only greatly reduce manual effort in managing expenses but also help analyse claims with built-in expense data analytics, making internal auditing far easier to run, less time-consuming, and more valuable to your organisation.  

There's no excuse for leaving your workforce burdened by poor expense management—not when taking action to relieve the pain is quick and easy. By ditching the paper forms and spreadsheets, you'll not only see great cost savings but also a happier, more efficient workforce—a business-savvy move that will please your people. 

Access Expense is a modern expense management system that is delivered via Access Workspace allowing integration with other Access software, giving you integrated analytics from across your business. To find out more: