Fraud and Fraud Detection: A Data Analytics Approach, + Website

CHAPTER 11 Expense Reimbursement Schemes

THE MOST COMMON TYPE OF EXPENSE reimbursement paid by organizations to employees is for travel and entertainment expenses. Also popular are purchase cards or procurement cards, a form of company charge cards that are issued to employees. It is often used for, but not restricted to, buying low-value goods and services to avoid the cost of red tape or processing cost associated with the normal procurement procedures. The company normally pays purchase-card bills, so it is not specifically expense reimbursement to an employee’s out-of-pocket costs. However, discussions of purchase cards traditionally fall under the expense reimbursement scheme category.

Travel and entertainment expenses are incurred at every level of employment, whether they are for sales, training, meetings, or attending conferences. Typically, those that incur the highest travel and entertainment expenses would be those in sales-related functions and executives of the company.

Detection relies on review and analysis of the expenses, followed by a detailed audit of the expense reports and supporting documents. Analysis can only point out anomalies that must be followed up by a thorough review of source documents. Similarly, sampling techniques can only select transactions which need to be audited in detail. Fraud would unlikely be uncovered unless the sample happened to pull out a transaction to audit by chance. The smaller the sample, the lower the opportunity there is ...