Travel and Expense Reimbursement Audit Program

Audit Objectives:

1. Evaluate the overall internal control environment resulting from the current processes.
2. Evaluate the effectiveness and efficiency of current processes.
3. Perform detailed testing of selected expense reports.

Audit Steps Auditor X-Ref. Date

A. Planning
During the planning portion of the audit, notify the client of the audit, discuss
the scope and objectives of the examination in a formal meeting with
organization management, gather information on important processes, evaluate
existing controls, and plan the remaining audit steps.
1. Obtain and read relevant policies, memos related to this area, and SOPs
2. Meet with the Director of Transaction Processing and walk through the
Travel & Entertainment Reimbursement process.
3. Review the Company Code of Conduct / HAK policies...
4. Meet with Disbursement Manager to update the understanding and
knowledge of the expense system software and review reports available.
5. Obtain and read the last audit issued for this area and review the findings.
Make note of those address items and incorporate them in the current year
audit, if applicable.
6. Write up audit background.
7. Download of expense transaction reports by Employee / Vendor for (insert
period under review).
a. T & E expense
b. Expense report
8. Use judgmental process to select the audit sample for employees with high
overall totals or high expenses by category. Watch for the following:
a. Purchases over $1000
b. Potential Private Fuel Purchases
c. Purchases made at department, convenience and wholesale stores
d. Purchases made at stationary & office product stores
e. Exceptional amounts charged in one day.
f. Create a listing report summarizing the top employees for YTD activity.
Have enough employees to cover at least 25 percent of the costs
incurred.

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 Audit Steps Auditor X-Ref. Date

B. Announcement Letter
This letter communicates the scope and objectives of the audit, the auditors
assigned to the project and other relevant information.
9. Inform the client of the audit through an announcement or engagement letter
from the Internal Audit Director.

Initial Meeting
10. Hold an opening meeting with the client. During this meeting, have the
client describe the unit or system to be reviewed, the organization, available
resources (personnel, facilities, equipment, funds), and other relevant
information.
11. Meet with the senior officer directly responsible for the unit under review
and any staff members s/he wishes to include. It is important that the client
identify the issues or areas of special concern that are to be addressed.

Preliminary Survey
12. In this phase, gather relevant information about the unit in order to obtain a
general overview of operations.
13. Talk with key personnel and reviews reports, files, and other sources of
information

Internal Control Review

14. Review the unit's internal control structure. Use a variety of tools and
techniques to gather and analyze information about the operation.
15. Determine the areas of highest risk and design tests to be performed in the
fieldwork section.

C. Transaction Testing
After completing the preliminary review, perform the procedures in the audit
program. These procedures usually test the major internal controls and the
accuracy and propriety of the transactions. Use various techniques including
sampling during the fieldwork phase. 
1. Review & verify purchases / services are in support of Company
operations
2. Review and verify that the documentation supports the expense.
3. Test effectiveness of controls over non reimbursable expenses
4. Test controls over approval of expenses
5. Analyze expenses and identify any of the following :
Gasoline : private usage
Office supplies commensurate with responsibilities
Subscriptions and Books

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Non reimbursable Food & beverages (Hotel honor bar, personal

Seminars : Catering services, equipment rentals
Purchases over $500
Items requiring capital authorization i.e. Office supplies : Furniture,
laptops, palm pilots
Restaurants : verify business clients or Company staff only
Airfare : test controls over authorization of first / business class, verify
that cancelled tickets are re-used on business purpose
Hotels : verify effectiveness of controls over cost per night, valet,
movies, in room bar
Auto rentals: Verify effectiveness of fuel clause control.

Working Papers
Working papers are a vital tool for Internal Audit. They are the support of the
audit opinion. They connect the client’s accounting records and financials to
the auditor’s opinion.

1. Ensure that the work-papers support the conclusions.

2. Create Index for Schedules

D. Advice & Informal Communications

1. Discuss any significant findings with the client.
2. Have the client can offer insight and work with the client to determine the
best method of resolving the finding.
Note: usually these communications are oral. However, in complex situations,
written communications such as memos and/or e-mails are in order to ensure
full understanding by the client and the auditor. Our goal: there must be "No
Surprises" for the client...

Audit Summary
3. Upon completion of the fieldwork, summarize the audit findings,
conclusions, and recommendations necessary for the draft of the audit report.

Audit Report
Company's IA's principal product is the final report in which IA expresses
opinions, presents the audit findings, and discusses recommendations for
improvements. To facilitate communication and ensure that the
recommendations presented in the final report are practical, discuss the rough
draft with the client prior to issuing the final report.
Discussion Draft

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1. At the conclusion of fieldwork, draft the report.

2. Have the IA Director thoroughly reviews the audit working papers and the
discussion draft before it is presented to the client for comment. This
discussion draft is prepared for the unit's operating management and submitted
for the client's review before the exit conference.

Exit Conference
1. When the IA Director has approved the discussion draft, meet with the unit's
management team to discuss the findings, recommendations, and text of the
draft.
2. At this meeting, the client comments on the draft and the group work to
reach an agreement on the audit findings.

E. Findings and Conclusions Formal Draft

1. Prepare a formal draft, taking into account any revisions resulting from the
exit conference and other discussions. When audit management and the client
have reviewed the changes, issue the final report.

Final Report
1. Obtain approval of the Internal Audit Director for the final report.
2. Print and distribute the final report to the unit's operating management, the
unit's reporting supervisor, the Vice President for Finance, the Chief Financial
Officer Accountant, and other appropriate members of senior management.

Client Response
The client has the opportunity to respond to the audit findings prior to issuance
of the final report, which can be included or attached to our final report.
However, if the client decides to respond after we issue the report, the first
page of the final report is a letter requesting the client's written response to the
report recommendations. In the response, the client should explain how report
findings will be resolved and include an implementation timetable. In some
cases, managers may choose to respond with a decision not to implement an
audit recommendation and to accept the risks associated with an audit finding.
The client should copy the response to all recipients of the final report if s/he
decides not to have their response included/attached to Internal Audit's final
report.

Client Comments
Finally, as part of Internal Audit's self-evaluation program, we ask clients to
comment on Internal Audit's performance. This feedback has proven to be very
beneficial to us, and we have made changes in our procedures because of
clients' suggestions.

F. Audit Follow-Up
Within approximately one year of the final report, Internal Audit will perform a
follow-up review to verify the resolution of the report findings.

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 Audit Steps Auditor X-Ref. Date

Follow-up Review
1. Review the client response letter and test the actions taken to resolve the
audit report findings to ensure that they achieved the desired results.
2. Discuss all unresolved findings in the follow-up report.

Follow-up Report
1. Prepare a follow-up report that lists the actions taken by the client to resolve
the original report findings. Unresolved findings will also appear in the follow-
up report and will include a brief description of the finding, the original audit
recommendation, the client response, the current condition, and the continued
exposure to Company Corporation.
2. Circulate a discussion draft of each report with unresolved findings to the
client before issuing the report. Circulate the follow-up review results to the
original report recipients and other Company officials as deemed appropriate.

Internal Audit Annual Report to the Board 

In addition to the distribution discussed earlier, the contents of the audit report,
client response, and follow-up report may also communicated to the Audit
Committee of the Board as part of the Internal Audit Annual Report.

The Process: A Collaborative Effort

As pointed out, during each stage in the audit process--preliminary review,
fieldwork, audit reports, and follow-up--clients have the opportunity to
participate. There is no doubt that the process works best when client
management and Internal Audit have a solid working relationship based on
clear and continuing communication.

Many clients extend this working relationship beyond the particular audit.
Once the audit department has worked with management on a project, we have
an understanding of the unique characteristics of your unit's operations. As a
result, we can help evaluate the feasibility of making further changes or
modifications in your operations.

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Wednesday, January 13, 2021