Group 1 BA601.2 Exercise 2 Case3.

3-BUE201-Travel_expense

I.

Background of concerned firms in the case: According to reports published, employees spend about $156 billion annually on travel and entertainment related to business. But reimbursement submitted show that the expenses come from hairdresser, traffic tickets and kennel fees. Although the IRS raised the amount allowable for undocumented expenses to $ 75, most companies maintain the limit for undocumented expense at $25 although the IRS raised it to $75. Employees sometimes make up fake bills and it is not true compared with their actual spending. Ethical issues: The amount of money spent or the purpose is not the same with real spending by employees. Employees sometimes make up fake bills in order to get reimbursement. The companies maintain the limit for undocumented expense at $25 although the IRS raised it to $75. Analysis: The employees used a lot of money for non-related purposes to their company and then they think of some reasonable reason to explain about their improper spending. They increase the price of a product or a service in the bills and compensate for the amount of money they spend. This problem infringe upon the financial situation of the company. The companies do not raise the limit for undocumented expense because they have to pay so much money for unauthorized expenditure by their employees. Besides, they set a lower limit spending than IRS means little money for spending Solution/ proposed module of decision: Internal auditors should be working more strictly. They need checked by to find the source of the bills and prove that they are not fake. Companies should set a higher limit for the employee expense like the IRS raised it to $75.

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IV.