Telecom Audit Guide

The word audit has a bad taste in my mouth due to the experience I had working with the Big 4, but today I stumbled across a topic that isn’t covered often in the accounting literature: telecom auditing.

Basically a telecom audit is when you have an expert review your telecommunication invoices, records, and contracts to ensure that budgets are correct and that they are being complied with. A quick story to illustrate that this is indeed important.

Once I was interviewing for an internal accounting job with a small startup company that had about 30 employees (mostly sales staff). If I would have taken the job I would have been their only accountant. During the interview, the CFO of the company was listing off some of the common expense entries I could expect to make. At the end of a very long list of big expenses he mentioned the phone system which caused me to chuckle a little bit. I’m from the cell-phone era and figured that landlines must be free these days even if they serviced 30 employees. He stopped the interview and said, “Don’t laugh, I’m not joking, those things are expensive.” I apologized and tried to explain my propensity to laugh at anything when I’m a little nervous.

The point is for companies of all sizes telecom expenses are extremely important. For large companies they range in the millions of dollars. For small to medium sized companies they make up a large portion of their total expenses.

Note of clarification: A lot of times people assume that telecom audits are limited to a very specialized niche. The truth is that a telecom audit encompasses almost all communication expenses: we’re talking Internet, email, cell-phone coverage, land-lines, and fax services. It might not be a bad idea to have someone review your communication budgets and agreements and see if your company is consistently going over budget or if you might be able to cut back somewhere.

Who performs telecom audits?

There are basically two different groups that can and do perform these types of audits: internal auditors and independent consultants. There is a lot of debate as to which group performs a better job.

Those who support using internal auditors to evaluate the communication budget argue that internal auditors understand the business better and they are not as expensive.

Those who support using an independent telecom auditing firm argue that internal auditors don’t have the necessary expertise.

Both groups have valid arguments and managers will have to make that decision on a case by case basis.

What actually happens during the audit?

That depends a lot on what type of business you have and who is doing the audit. However in almost all cases the reviewers will look at the telecommunication agreement and compare it to the prices being charged on the invoices. This comparison is often known as a telecom bill audit. Telecom bill auditing is perhaps the most valuable part of the process because mistakes may be found on behalf of the communications provider where they overbilled. It is also useful to review these bills because you may find departments or people who are abusing their communication rights and costing your company money.

As always if you want to learn more about a telecom audit feel free to mention so below. Look for more articles on this subject in the future.