The centerline on each chart represents the percentage of defective tax returns expected of a competent person. If this is used as the standard, the firm will assess the accuracy of each preparer against it. If an out of control point occurs, the reason should be investigated. The firm should counsel the employee concerning this finding and try to learn why there are more errors on Mondays than on other days of the week. Once the cause is known, the employee may be able to avoid these out of control points in the future.
Organizations can use control charts to manage costs and expenses.
Effective monitoring of expenses includes controls that ensure that expenses are properly authorized and documented, and controls that monitor the level of expenses. Travel and entertainment is an expense that should be monitored for both cost control and tax reasons. Selection of the appropriate control chart depends upon whether the primary focus is on monitoring the level of expenses, or on monitoring whether travel and entertainment expenses have been properly authorized and documented. To monitor authorization and documentation, a company can take samples of travel and entertainment expense vouchers on a monthly basis. Each voucher would be examined to verify that the expenses were properly authorized and that proper documentation is attached.