Expense Schemes

By Jean Pavlin, CPA and Certified Fraud Examiner  

Two common expense schemes are Mischaracterized Expenses and Overstated Expenses.

Mischaracterized Expenses occur when an employee requests reimbursement for a personal expense, claiming the expense to be business related, while Overstated Expenses occur when an employee overstates the cost of actual expenses and seeks reimbursement.

Use the questions below to determine if you need to adjust your office procedures and better protect yourself from expense schemes.

Q1. Are employees required to submit detailed expense reports?

Q2. Is a limit placed on expenses such as hotels, meals, and entertainment?

Q3. Do employee expense reimbursement claims receive a detailed review before payment is made?

Q4. Are the expense accounts reviewed and analyzed periodically using historical comparisons or comparisons with budgeted amounts?

ANSWERS

A1. Employees should be required to submit detailed expense reports containing receipts, explanations, amounts, etc.

A2. Companies should place a spending limit on expenses such as hotels, meals, and entertainment.

A3. Employee expense reimbursement claims should receive a detailed review before payment is made.

A4. Companies should periodically review and analyze expense accounts using historical comparisons or comparisons with budgeted amounts.