Building a risk-based audit plan for high-risk travel and entertainment

Travel and entertainment (T&E) expense claims remain one of the most fertile areas for fraud, bribery, and weak controls inside Australian organisations. From hospitality at corporate boxes during AFL matches to international trips for mining executives, the sheer volume of transactions creates blind spots that opportunistic staff can exploit. A risk-based audit plan allows compliance and finance teams to focus limited resources on the exposures that genuinely matter, rather than spreading effort evenly across every receipt.

The shift away from transactional checking toward risk-focused testing has accelerated as Australian regulators raise their expectations. Directors and senior managers are now expected to demonstrate that they have identified where the company is most exposed, allocated audit coverage accordingly, and can evidence the rationale. The Business Anti-Corruption Portal offers a useful post-incident review framework that can complement the audit plan by clarifying what to investigate once a red flag surfaces.

Understanding travel and entertainment risk exposure

T&E spending is uniquely vulnerable because it combines three ingredients that auditors rarely find together: cash-equivalent transactions, personal discretion by the requester, and a documented business purpose that can be manufactured after the fact. A dinner in Melbourne's South Bank with a potential client, a flight to a remote Pilbara site, or tickets to the Boxing Day Test at the MCG can each be defended with a plausible narrative even when the underlying activity warrants closer scrutiny.

The risk profile differs sharply by industry. A Perth-based mining services firm sending engineers to regional operations faces different exposures than a Sydney fintech hosting overseas investors. Mining and resources companies often grapple with gifts, hospitality, and facilitation payments in jurisdictions where Australian anti-bribery laws apply extraterritorially. Professional services firms, by contrast, tend to see risks cluster around client entertainment, conferences, and sponsorship arrangements. Mapping these sectoral patterns is the first analytical step before any audit plan is finalised.

Mapping regulatory expectations in Australia

Australian organisations operate under overlapping layers of accountability when it comes to T&E. The Australian Taxation Office (ATO) requires substantiation of business deductions and applies Fringe Benefits Tax (FBT) to many entertainment benefits provided to employees or their associates. Failure to maintain adequate records or to correctly classify benefits can trigger reassessments, penalties, and reputational damage. Beyond tax, the Corporations Act 2001 imposes director duties that include taking reasonable steps to ensure the company is not exposed to bribery and corruption risks.

For companies subject to the Modern Slavery Act 2018, travel arrangements that involve third-party agents, accommodation providers, or logistics partners in higher-risk jurisdictions add another compliance layer. Anti-money laundering obligations also touch T&E in industries such as bullion trading, remittance, and gaming, where large entertainment budgets can intersect with cash-intensive counterparties. Auditors should reference these statutes explicitly in their scoping documents so the board understands the regulatory floor beneath the audit programme.

Identifying high-risk transactions and patterns

A useful starting point is to analyse twelve to twenty-four months of T&E data, segmented by cost centre, employee level, and geography. Patterns worth probing include clustered claims around specific vendors, late submissions by senior staff, weekend entertainment, and reimbursements to employees who rarely travel but suddenly appear in expense reports. Round-figure receipts, claims that fall just below approval thresholds, and a high frequency of client development entries all deserve closer attention.

Indicators that often correlate with elevated exposure:

Hospitality at sporting venues such as Sydney Olympic Park, Marvel Stadium, or Adelaide Oval where the business purpose is loosely described
Travel to counterparties in sectors flagged by Transparency International or the ATO as carrying higher integrity risks
Use of third-party booking agencies rather than corporate travel tools, which obscures the audit trail
Entertainment expense claims during procurement cycles, contract renewals, or licensing negotiations

Each red flag does not automatically imply misconduct, but combinations of factors are what justify deeper testing.

Designing the audit scope and methodology

Once risk areas are identified, the audit plan should articulate scope, period, population, and methodology in unambiguous language. Scope might be limited to a particular business unit, such as the Sydney-based sales leadership team or the Brisbane operational division, rather than the entire enterprise. The audit period should align with fiscal year boundaries to simplify evidence gathering, while the population definition needs to exclude immaterial items at the outset.

Methodology should combine three streams. First, a desk review of policy, training records, and prior incident logs to assess whether governance foundations are sound. Second, a data-driven screening of the expense ledger using analytics tools to isolate outliers. Third, targeted interviews with line managers and finance staff in locations where the risk profile is highest. Fieldwork planning should anticipate that evidence will need to be obtained from corporate credit card providers, hotels in cities like Cairns or Darwin, and entertainment venues across multiple states.

Sampling, data analytics, and field testing

Statistical sampling alone is rarely sufficient for high-risk T&E categories because the population is small enough that judgmental sampling produces better results. Auditors should pre-select a list of items that combine dollar value, behavioural signals, and contextual risk, then expand to a wider random sample only after anomalies are ruled in or out. Continuous auditing dashboards can also be built to flag new claims as they arise, allowing the team to intervene before transactions are fully processed.

Field testing should verify that supporting documentation genuinely substantiates the business purpose. A receipt for a Melbourne restaurant may prove the meal occurred, but does not confirm the attendees were genuine business prospects. Auditors should reconcile attendee lists with CRM data, review calendar invitations, and cross-check hospitality against deal pipelines. Where discrepancies emerge, escalation protocols must be clear so the matter can move from audit to investigation without delay.

Reporting findings and remediation pathways

Audit findings should be graded by severity and by root cause rather than presented as a flat list of deficiencies. Common root causes include unclear policies, weak manager review, inadequate segregation of duties between requesters and approvers, and gaps in third-party due diligence for travel agents and venues. Each finding should be tied to a recommendation that is specific, costed, and time-bound.

Practical remediation levers available to Australian organisations include:

Tightening pre-approval workflows so entertainment above a defined dollar threshold requires sign-off from a senior executive outside the requester's reporting line
Rebating FBT to align with ATO rulings and removing manual workarounds that obscure taxable value
Introducing corporate cards with merchant category restrictions that block high-risk vendors automatically
Conducting targeted refresher training in offices where incident patterns suggest cultural drift

The audit report should also describe the residual risk after remediation so the audit committee can weigh whether further investment in controls is warranted.

Embedding continuous monitoring and governance

A risk-based audit plan is not a one-off project. It should be reviewed annually, or more frequently if the business undergoes significant change such as a merger, expansion into a new market, or a regulatory enforcement action. Continuous monitoring tools, including automated expense screening and exception reporting delivered to internal audit, can keep the plan relevant between formal reviews.

Governance structures should be reinforced so the audit findings translate into action. The audit committee, supported by internal audit, can mandate quarterly status updates from management until high-severity findings are closed. Linking T&E audit outcomes to broader integrity metrics, such as gifts and hospitality register entries and conflict-of-interest declarations, helps the board see a unified picture. Where external expertise is required, organisations can contact the portal to access specialist support.

The practical takeaway is straightforward: a risk-based audit plan for high-risk travel and entertainment expenses succeeds when it is anchored in clear regulatory obligations, supported by analytics-driven testing, and embedded in governance that closes the loop on findings rather than letting recommendations drift in follow-up registers.