How to Spot and Stop Expense Account Cheating
Edited by, Ciro Cuono, Partner, CPA/ABV/CFF, CVA, CGMA
Suppose that one of your clients recently caught an employee falsifying an expense report. The client fired the individual, but because the fraudulent amount was relatively small, the business decided not to prosecute. As far as your client is concerned, the case is closed.
Unfortunately, the same conditions that make it possible for one employee to cheat may enable others to submit false expense reports. Even small amounts can add up to big losses when several employees and multiple reports are involved.
Employees Ingenuity
There are as many ways to cheat on an expense account as there are employees willing to cheat. One of the most common methods is to mischaracterize expenses – using legitimate receipts for nonbusiness-related activities. If Sarah treats her friend Jennifer to a birthday dinner, for example, that generates an actual receipt, but it shouldn’t show up on Sarah’s expense account.
Requesting multiple reimbursements is riskier, but just as simple. If Sarah wants her company to pay for Jennifer’s birthday dinner twice, she copies the receipt and turns it on another expense report. Worse, she may attempt to be paid once for the bill, once for the receipt and once for the credit card statement.
Some employees simply overstate their expenses by doctoring supporting paperwork – for example, by changing a 3 to an 8 or a 1 to a 4 on a receipt. Then, there are cheats who invent expenses. All David needs to do is ask a cab driver for an extra receipt, fill it out and turn it in for reimbursement.
These and other small expense account infractions can add up to outrageous sums. In one case, a top salesperson who traveled extensively for business was found to have defrauded his company $30,000 over the course of three years by adopting a liberal definition of allowable business expenses.
How to Spot and Stop Expense Account Cheating
Edited by, Ciro Cuono, Partner, CPA/ABV/CFF, CVA, CGMA
Suppose that one of your clients recently caught an employee falsifying an expense report. The client fired the individual, but because the fraudulent amount was relatively small, the business decided not to prosecute. As far as your client is concerned, the case is closed.
Unfortunately, the same conditions that make it possible for one employee to cheat may enable others to submit false expense reports. Even small amounts can add up to big losses when several employees and multiple reports are involved.
Employees Ingenuity
There are as many ways to cheat on an expense account as there are employees willing to cheat. One of the most common methods is to mischaracterize expenses – using legitimate receipts for nonbusiness-related activities. If Sarah treats her friend Jennifer to a birthday dinner, for example, that generates an actual receipt, but it shouldn’t show up on Sarah’s expense account.
Requesting multiple reimbursements is riskier, but just as simple. If Sarah wants her company to pay for Jennifer’s birthday dinner twice, she copies the receipt and turns it on another expense report. Worse, she may attempt to be paid once for the bill, once for the receipt and once for the credit card statement.
Some employees simply overstate their expenses by doctoring supporting paperwork – for example, by changing a 3 to an 8 or a 1 to a 4 on a receipt. Then, there are cheats who invent expenses. All David needs to do is ask a cab driver for an extra receipt, fill it out and turn it in for reimbursement.
These and other small expense account infractions can add up to outrageous sums. In one case, a top salesperson who traveled extensively for business was found to have defrauded his company $30,000 over the course of three years by adopting a liberal definition of allowable business expenses.
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