The audit happens every quarter, not when someone remembers
A recurring schedule creates the audit at the start of each month or quarter with the audit lead, reviewer and CFO assigned and every due date counted from the period end.
Expense Audit Checklist Template
Approval before payment catches the obvious. The receipt paid on the corporate card and claimed again out of pocket, or the dinner split into two claims just under the limit, only shows up when someone looks across claims after they have been paid.
An expense audit looks back at claims already approved and paid, to test whether approval worked, whether the tax treatment was right and whether anyone is exploiting the gaps. This free expense audit checklist is for finance managers, controllers and internal auditors who review employee expenses monthly or quarterly. It covers defining and reconciling the population, risk-based and random selection, receipt and policy testing, the tax checks, findings and recovery, and a report to the CFO or audit committee. A scope question at the start shows the UK tax phase, the US tax phase or both, and a second question adds corporate card spend coded to expenses to the population.
Expense Audit, Expense Approval and Card Reconciliation Are Different Controls
Most expense controls look at one claim at a time: a manager approves, finance checks the receipts, the claim is paid. That cannot see patterns: the same hotel bill claimed by two colleagues, a manager who always approves at 11pm without opening the receipts, or an employee whose mileage would mean driving 400 miles every working day.
The audit looks across the whole paid population, picks the claims most likely to be wrong plus a random sample, and tests them properly, including points a line manager is rarely qualified to judge, such as VAT recovery or US accountable plan treatment. Findings go back into the policy and the approval limits.
Before payment
Expense reimbursement
- One claim at a time, as it is submitted
- Receipts attached, policy limits, business purpose
- Line manager and finance approval
- Run with the Expense Reimbursement Checklist
Every month
Card reconciliation
- Every card transaction on the statement
- Coding, receipts and manager sign-off per cardholder
- Statement agreed to the card liability account
- Run with the Credit Card Reconciliation Checklist
After payment
Expense audit (this checklist)
- The whole paid population, tested by risk and at random
- Duplicates and splits across claims and cards
- Tax treatment, approver authority and timing
- Findings, recovery and policy changes
What the Expense Audit Checklist Covers
Seven phases take the audit from population to report. Phase 4 appears for UK claims and Phase 5 for US claims; answer “Both” to see each.
Scope
Phase 1: Define the Period & Population
Owned by the audit lead. The two scope questions decide which tax phase appears and whether card spend is tested.
- Name the audit lead, finance reviewer and CFO approver — later tasks are assigned from these three fields
- Answer the scope questions — UK, US or both, and whether corporate card spend coded to expenses is in the population
- Extract every paid claim line for the period — claimant, approver, approval and payment dates, amount, category, merchant and, if in scope, card transactions coded to expenses
- Reconcile the extract to the ledger — its total agrees to the expense accounts for the period, so nothing escapes testing
- Attach the policy, approval limits and rates in force for the period — including mid-period changes such as the UK mileage rate rising to 55p from 6 April 2026
- Review last audit’s findings — repeat claimants, approvers and categories set the risk focus for this one
Selection
Phase 2: Risk-Based & Random Selection
- Run duplicate tests — same amount, date and merchant across claims, across claims and card transactions, and the same receipt claimed by two people
- Flag possible split claims — items on the same day or with the same merchant that each fall just under an approval or receipt threshold
- Flag approval weaknesses — self-approval, approval by someone who reports to the claimant, and approval dated after payment
- Flag weekend, public holiday and leave dates — cross-checked against the HR absence record
- Flag round sums, missing merchant names and items above the high-value cut-off — the cut-off is set in the audit plan, not chosen afterwards
- Flag mileage outliers — claimed distances against a route planner, and UK annual totals near the 10,000-mile band
- Add a random sample and record the method — so every claim has a chance of selection and the reviewer can re-perform it
Testing
Phase 3: Receipt & Policy Testing
- Match each selected item to an itemised receipt — a card slip or statement shows payment, not what was bought
- Test against the policy in force on the expense date — category, limits, class of travel, alcohol and per diem rules
- Confirm business purpose and attendees are recorded — names and organisations for every meal with guests
- Check the approver had authority for the amount — against the delegation of authority, and that approval came before payment
- Re-perform currency conversions and mileage calculations — exchange rate, distance and the per-mile rate for the date
- Log each exception with a category and amount — missing receipt, over limit, personal, duplicate, wrong rate or no authority
UK Claims
Phase 4: UK Tax & VAT Checks
Shown only when the scope answer is UK or Both.
- Check VAT was reclaimed only on a valid VAT invoice — a simplified invoice is enough for supplies of £250 or less including VAT; reverse VAT taken from a card slip or statement
- Check no VAT was reclaimed on business entertainment — staff entertainment and staff subsistence are recoverable, client entertainment generally is not
- Test mileage against approved mileage allowance payments — 55p a mile for the first 10,000 business miles from 6 April 2026 (45p before), 25p after; any excess is taxable
- Test flat-rate subsistence against HMRC benchmark scale rates or your approved bespoke rates — anything paid above them is taxable unless backed by receipts
- List taxable items and decide their treatment — personal spend not repaid, ordinary commuting and non-business items go on the P11D, through payroll or into a PAYE Settlement Agreement
- Send reportable items to payroll — employee, tax year and amount, ahead of the 5 July PSA and 6 July P11D deadlines
US Claims
Phase 5: US Accountable Plan Checks
Shown only when the scope answer is US or Both.
- Confirm the plan meets the three accountable plan tests — business connection, substantiation and return of excess, each within a reasonable period
- Test timing against the safe harbour you use — fixed date method: substantiate within 60 days, return excess within 120; or periodic statements at least quarterly
- Check receipts for all lodging and for other expenses of $75 or more — and that amount, date, place and business purpose are recorded for every item
- Test mileage against the IRS business standard mileage rate — 72.5 cents a mile to 30 June 2026 and 76 cents from 1 July 2026; any excess is wages
- Separate meals from entertainment in the coding — business meals are generally 50% deductible, entertainment is not deductible
- Send unsubstantiated or unreturned amounts to payroll as wages — subject to income tax withholding, social security, Medicare and FUTA
Findings
Phase 6: Findings, Recovery & Escalation
- Summarise exceptions by category, claimant and approver — count, value and exception rate for the sample
- Give claimants and approvers a chance to respond — a missing receipt found now closes the finding
- Recover overpayments the lawful way — repayment, or a payroll deduction only where the contract or prior written consent allows it
- Escalate suspected fraud to the CFO before contacting the employee — preserve the evidence and follow the fraud response plan with HR and legal
- Correct the books — journals for miscoding, and VAT or payroll adjustments on the next return or pay run
Report
Phase 7: Report, Approve & Fix the Policy
- Draft the audit report — population, selection method, sample size, exceptions, amounts recovered and root causes
- Propose policy and approval-limit changes — for example a lower receipt threshold, blocked self-approval or a per diem in place of actuals
- CFO approval of the report and action plan — the checklist halts until the CFO answers
- Present the results to the audit committee or board — and record the date and any actions it adds
- Set owners and dates for each action and schedule the next audit — next audit tests whether the fixes worked
Red Flags and the Rules You Test Against
Each red flag in Phase 2 points at a way the approval process can fail. None proves anything on its own: a weekend hotel bill may be a Sunday-night flight. They tell you where to look first.
| Red flag | What it can mean | How the audit tests it |
|---|---|---|
| Same amount, date and merchant twice | A receipt claimed twice, or paid on the corporate card and claimed again | Duplicate test across claims and card transactions, then the receipts |
| Several items just under a limit | One expense split to avoid a receipt or approval threshold | Group by claimant, date and merchant; compare the combined total with the limit |
| Claimant approved their own claim | A gap in the approval workflow, or a delegate approving for a senior manager | Approver against the claimant and the delegation of authority |
| Expenses on leave days or public holidays | Personal spend presented as business | Dates against the HR absence record and travel bookings |
| High annual mileage or repeated identical journeys | Inflated distances or commuting claimed as business travel | Distances against a route planner; journeys against diary or client records |
| Claims submitted long after the expense | Old receipts recycled; in the US, loss of accountable plan treatment | Submission date against expense date and the substantiation deadline |
The tax rules differ more than most expense policies admit. The table below sets out the points Phases 4 and 5 test, as in force in October 2026.
| Point tested | United Kingdom | United States |
|---|---|---|
| Tax-free mileage | Approved mileage allowance payments: 55p a mile for the first 10,000 business miles in a car or van from 6 April 2026 (45p before), then 25p; motorcycles 24p, bicycles 20p | IRS business standard mileage rate: 72.5 cents a mile from 1 January 2026, 76 cents from 1 July 2026; reimbursement above the rate is wages |
| Receipts | VAT can be reclaimed only with a valid VAT invoice; a simplified invoice is acceptable at £250 or less including VAT | Documentary evidence for all lodging and for any other expense of $75 or more, plus a record of amount, date, place and business purpose |
| Flat-rate allowances | Benchmark scale rates for subsistence (£5, £10 and £25 for qualifying journeys of 5, 10 and 15 hours, the last ongoing at 8pm) or an HMRC-approved bespoke rate | Per diem at or below the federal rate is treated as substantiated for the amount; the excess is wages |
| When a reimbursement becomes taxable | Non-exempt payments and personal spend go on the P11D, through payroll or into a PAYE Settlement Agreement | Amounts not substantiated or not returned within a reasonable period are paid under a nonaccountable plan and are wages |
What changed in 2026, and what is coming. The UK raised the approved mileage rate for cars and vans from 45p to 55p, backdated to 6 April 2026 and the first change since 2011; legislation is to follow with retrospective effect. Employers that kept paying 45p can top up the difference tax-free, so check which rate each claim used. In the US, the IRS raised the business mileage rate mid-year, from 72.5 to 76 cents for miles driven on or after 1 July 2026, citing fuel prices. From 6 April 2027 UK employers must payroll company cars, vans, fuel and medical benefits in real time, with most other benefits following from 6 April 2028, so taxable items found in an audit will increasingly need to reach payroll during the year.
Why Run Expense Audits in CheckFlow?
Sign-off that cannot be skipped
The report goes to a named CFO as an approval task. Nothing after it can be completed until the CFO records Approved or Not approved, so the audit committee only sees a reviewed report.
Findings with their evidence attached
The extract, the selection, receipts and exception notes sit on the task that produced them, and the timestamped activity trail can be exported for external auditors.
Most findings trace back to a weak step earlier in the cycle. The Expense Reimbursement Checklist fixes the approval before payment, the Credit Card Reconciliation Checklist gets card receipts and coding in each month, and the Payroll Audit Checklist checks that taxable expenses reached payroll.
CheckFlow is not an expense management system or a data analytics tool. The duplicate tests run in your expense software, ERP or spreadsheet; CheckFlow runs the audit around them, so every step is assigned, evidenced and approved. Read how approval workflows work, or how conditional logic shows only the tax phase that applies.
Frequently Asked Questions
What is an expense audit?
A review of employee expense claims, and often corporate card spend, after approval and payment. It selects claims by risk and at random, tests them against receipts, policy and tax rules, recovers anything paid in error and reports the results.
How many expense claims should we sample?
There is no legal minimum. Many teams test every claim that hits a red flag and add a random sample of the rest, sized so each active claimant is likely to be selected over a year. To state an error rate for the whole population, use a statistical sampling method and record it in Phase 2.
What are the most common signs of expense fraud?
Duplicate claims, including a corporate card charge claimed again out of pocket; expenses split to stay under a limit; personal spend on leave days or public holidays; inflated mileage; round-sum or unreceipted claims; and claims approved by the claimant or by someone who reports to them. Each needs investigating before anyone draws a conclusion.
What is the HMRC mileage rate for 2026/27?
For cars and vans, 55p a mile for the first 10,000 business miles in the tax year and 25p a mile after that, from 6 April 2026. The rate was 45p until 5 April 2026. Motorcycles stay at 24p and bicycles at 20p. Employers can pay up to these approved amounts tax-free; anything above them is taxable.
What happens if a US employee does not substantiate expenses within 60 days?
Sixty days is a safe harbour under the fixed date method, not a hard deadline. But amounts not substantiated, or advances not returned, within a reasonable period are treated as paid under a nonaccountable plan: they become wages, subject to withholding, social security, Medicare and FUTA.
Is CheckFlow free for this template?
14-day free trial, no card required. The Business plan is $10 per user per month after the trial. Full details at checkflow.io/pricing.