Here is the quote from the IRS Tax Code:
Generally, in order to deduct an entertainment or meal expense, a taxpayer must substantiate by adequate records or sufficient evidence corroborating the taxpayer’s own statement the following elements:
(3) Place (name and address or location) and type of entertainment or meal.
(4) Reason for entertainment or the business purpose and the nature of the business benefit expected to be gained;
(5) Business relationship to the taxpayer of the persons at the entertainment or meal (name, occupation, title); and
(6) Presence of the taxpayer or an employee at the business meal.
Numbers 1 - 3 must be demonstrated through the presence of a receipt. Number 4 and 5 should be shown through the presence of the employee's expense diary. Here is how that is described by the IRS:
Adequate Records and Sufficient Evidence (IRS pp. 3593)
To prove expenses for entertainment, travel, gifts, and listed property by “adequate record”, a detailed record must be kept, such as a diary, an account book or some other statement of expense. A taxpayer, however, does not have to record information in an account book, etc. that duplicates information reflected on a receipt so long as the two forms of evidence complement each other. In addition to the diary or account book, the taxpayer must have documentary evidence (a receipt) for any lodging while traveling away from home and for any other expenditure over $75 or more.
Employees keeping expense reports should get in the habit of keeping detailed and consistent records, always in the same form, for easy reference and auditing.
The final element of the list - presence of the employee at the function - can be shown through the detailed diary, but it should also be shown through the use of payment method. Employees should be in the habit of payign via credit card/check so that there is a reliable way of tracking the expenses and showing that the expenses were incurred by the employee himself/herself.