In our previous blog post regarding the QuickBooks Audit Trail, we discussed what the tool is, what it captures and how to use the tool.
To recap, the QuickBooks Audit Trail (or Audit Log, depending on the version) provides a log of each accounting transaction and denotes any additions, deletions or modifications affecting the integrity of the transaction. The tool captures every transaction from the time it is initially entered into QuickBooks, and tracks changes to the original entry, including transaction type, date, account, vendor/customer name, transaction amount, quantity, and price. The Audit Trail also reveals the User ID under which the entry, deletion or modification was made. The Audit Trail is a report built in the QuickBooks ReportCenter– all you have to do is click a button to generate the report.
One question posed in the blog was, “So, I can use QuickBooks to prevent and detect fraud?” The answer is a definitive yes. Employers can use the audit log to detect warning signs of fraud, waste and abuse.
What are the footprints that could reveal fraud?
– Transactions with more than one entry in the audit log, which indicate that a change has been made to the transaction after it was originally entered in the system.
– Name or description changes.
– Dates that have been changed from the original entry to the last modified date.
– Changes in check number.
– Changes in the amount of transaction.
How do we detect fraud with the audit log?
The indicators of fraud, waste and abuse can be identified through the audit log in numerous ways, including:
1. Export the audit log to Excel.
2. Search for the words “deleted” or “void.” If a check was created and then deleted or voided, it will show the transaction as it originally appeared, including the general ledger accounts the transaction was originally charged against. By searching for “deleted” or “void,” we can identify checks that may have been created, deleted or voided from the system but still cleared the bank. After isolating the deleted and voided checks, search the bank statements to verify if the checks cleared and if so, to determine the payee.
3. Use the Same, Same, Different methodology to search for a change to the payee name. Data analytics allows us to identify all checks that have the same check number but have a different payee. After isolating these checks, we can search the bank statements to verify if the checks cleared and who the payee was on the check that cleared.
4. Identify changes to a record outside an expected period of time. The audit log includes fields for enter date, last modified date, and the latest and prior dates. By calculating the difference between the enter date and the last modified date we can determine if changes were made outside of a reasonable time period.
For example, a company may have an expectation that no changes be made to a disbursement transaction more than 60 days after a transaction was prepared. By calculating the difference between the enter date and the last modified date, we can isolate all disbursements with changes greater than 60 days.
5. Look for a changed check number. When a check number is changed in QuickBooks, there are multiple entries in the audit log under the final check number. Each entry in an audit log has a “header record” – typically the check number. We can create a calculated field to find where the check number in the header record is different from the check number in the “NUM” field. Search the audit log to determine if either the original check number or the new check number have other entries in the audit log. After isolating these differences, we can search the bank statements to determine if both checks cleared and who the payee was on the check that cleared.
6. Isolate transactions to determine which amounts have been changed. We can use a simple calculation to determine changes in amounts. After we isolate those transactions in which the amounts have been changed, we can verify the amounts against supporting documentation and cancelled checks. If a check was issued for more than an invoice, contact the vendor to determine if a refund was issued for the difference. If a refund was issued, request a copy of the cancelled check issued and attempt to follow this transaction through the company’s books and records to determine if the company received the benefit of the refund issued.
Similar to many other red flags of fraud, the footprints of fraudulent behavior found in the audit log of QuickBooks require additional analysis of supporting documentation and corroboration with independent records, such as cancelled checks from the bank and confirmation with vendors. If you are interested in learning more about how our firm can assist you with financial investigations, please contact us.
Lindsay H. Gill
Director of Forensic Technology
Lindsay H. Gill is the director of forensic technology at Forensic Strategic Solutions. Ms. Gill has a breadth of experience in data analytics, computer forensics, internal investigations, antifraud programs and controls, fraud vulnerability assessments, and investigative financial consulting.
False Claims Investigation
When a whistleblower sounded the alarm on their employer that had allegedly violated the Anti-Kickback Statute and submitted false claims to the government, FSS was hired by the whistleblower’s attorneys to pinpoint evidence and determine the value of any identified claims.READ FULL CASE STUDY
Vulnerability Assessment – Cash Flow Shortages
FSS was hired by a company to perform a vulnerability assessment to determine if cash flow shortages were the result of financial mismanagement or asset misappropriation.READ FULL CASE STUDY
FSS was engaged to perform a vulnerability assessment of a large construction company’s accounts payable and payroll.READ FULL CASE STUDY
Embezzlement – Nonprofit
FSS investigated allegations of misappropriation of assets and excessive spending by an employee of a federally funded nonprofit organization with reporting responsibilities to the Office of the Inspector General.READ FULL CASE STUDY
FSS was hired by the Board of Directors of a regional company to assist with an internal investigation amid questions of unexplained declines in cash flows and the lack of timely financial reporting.READ FULL CASE STUDY
Asset Tracing – Misappropriation of Assets
FSS investigated the alleged misappropriation of assets by two former employees of a multi-faceted conglomerate.READ FULL CASE STUDY
FSS was hired by a company to investigate whistleblower allegations to the IRS of underreported revenue.READ FULL CASE STUDY
FSS was hired by the bankruptcy trustee to determine if an investment run by a rogue money manager (“the Project”) was a Ponzi scheme and to testify before the bankruptcy court regarding our findings. New investors were promised unusually high rates of return. The payment of accrued interest to short term investors was paid current […]READ FULL CASE STUDY
FSS investigated the allegations of misappropriation of assets from a medical practice amid concerns that the accounting clerk was embezzling funds.READ FULL CASE STUDY
Corruption and Conflicts of Interest
The Los Angeles Unified School District (LAUSD) is the second largest school district in the country with an annual budget in excess of $11 billion. Mired with problems and a price tag estimated over $200 million, the LAUSD hired FSS to determine the sources and uses of funds for the Belmont Learning Center project. The […]READ FULL CASE STUDY
The Power of Advanced Data Analytics | Lindsay H. Gill
Lindsay H. Gill, director of forensic technology, explains the benefits advanced data analytics bring to financial investigations Advanced data analytics can provide unparalleled insights when attorneys enlist forensic investigators, helping to ensure vital information does not go undetected.WATCH VIDEO
Analyzing the Variety of Data | Lindsay H. Gill
Lindsay H. Gill, director of forensic technology, discusses the differences between structured data – or “traditional” data – and unstructured data, which investigators use to help fill the holes or see the bigger picture within a case. Lindsay also explains how forensic investigators should use and compare structured and unstructured data.WATCH VIDEO
Speech, Voice and Body Language as a Lie Detector | Kelly J. Todd
Kelly J. Todd, managing member and member in charge of forensic investigations, discusses how investigators can use vocal tone and body language as a lie detector. Kelly also outlines how statement analysis can help an investigator understand the meaning behind the words, and highlights body language red flags to look for in an interview.WATCH VIDEO
Detecting Deception: Determining the Baseline | Kelly J. Todd
Kelly J. Todd, managing member and member in charge of forensic investigations, explains that everyone has a “norm”– a basic pattern of behavior that they exhibit under normal amounts of stress, which is also known as their baseline. In this video, Kelly outlines the steps to take to determine the baseline during an interview. She […]WATCH VIDEO
Myths in Detecting Deception | Kelly J. Todd
Kelly J. Todd, managing member and member in charge of forensic investigations, discusses common myths in detecting deception. Contrary to popular belief, detecting deception can be a challenge, as people tend to focus on the wrong signals. Kelly explains misconceptions about the behaviors and body language of someone who is lying, and how to increase […]WATCH VIDEO
Using Data to Tell a Story & Find the Answers | Kelly J. Todd
Kelly J. Todd, managing member and member in charge of forensic investigations, discusses how FSS uses advanced data analytics to ferret out the truth in fraud investigations via data visualization. Kelly explains how electronic evidence and data can be leveraged in forensic investigations, from verifying or challenging a plaintiff’s testimony to identifying trends and patterns […]WATCH VIDEO
Defining Embezzlement & How to Prevent It | Kelly J. Todd
Kelly J. Todd, managing member and member in charge of forensic investigations, explains what embezzlement is and how it occurs. To prevent embezzlement from occurring, it is essential for employers to trust their employees, but verify their actions. In the video, Kelly provides best practices that employers should implement to accomplish this.WATCH VIDEO
Conflicts of Interest: Educational Tools for Employers | Kelly J. Todd
Kelly Todd, managing member at Forensic Strategic Solutions, discusses how conflicts of interest can arise in the workplace and challenges associated with conflicts of interests that employers often face. She also discusses educating employees on conflicts and how to detect conflicts.WATCH VIDEO
The Common Denominator of Corruption: Conflicts of Interest | Kelly J. Todd
Kelly Todd, managing member at Forensic Strategic Solutions, discusses the close relationship between conflicts of interest and corruption. She also discusses preventative measures that can be taken to minimize opportunities for conflicts of interest to morph into corruption.WATCH VIDEO
Leveraging Social Media in Fraud Investigations – II | Lindsay H. Gill
Lindsay Gill, director of forensic technology at Forensic Strategic Solutions, shares insight into the benefits associated with attorneys hiring forensic investigators to uncover evidence on suspects’ social media accounts. She also discusses how to authenticate the evidence gathered and the methods to do so.WATCH VIDEO
Leveraging Social Media in Fraud Investigations – I | Lindsay H. Gill
Lindsay Gill, director of forensic technology at Forensic Strategic Solutions, discusses social media and its role as a helpful tool to uncover fraudulent electronic evidence in an investigation. She also describes best practices for forensic investigators to collect, analyze and interpret findings to connect the dots.WATCH VIDEO
What to do When You Suspect Fraud at Your Organization – II | Kelly J. Todd
Kelly Todd, member in charge of forensic investigations, discusses how to handle the alleged perpetrator, including notifying the perpetrator, conducting an admission-seeking interview and restricting the wrongdoing employee from company access. She also notes the importance of notifying your insurer when you think you might have fraud occurring in your organization.WATCH VIDEO
What to do When You Suspect Fraud at Your Organization – I | Kelly J. Todd
Kelly Todd, member in charge of forensic investigations, discusses the prevalence of fraud in businesses and actions one should take when they suspect fraud in their organization, including assembling a team for the fraud investigation and securing potential evidence.WATCH VIDEO
Data Analytics with a Focus on Technology | Lindsay H. Gill
Lindsay Gill, director of technology at Forensic Strategic Solutions, reviews the key areas in which technology has changed the landscape of fraud investigation and how data continues to become a growing risk for businesses.WATCH VIDEO
Employee Fraud Awareness Training | Kelly J. Todd
Kelly Todd, member in charge of forensic investigations, gives fraud prevention tips aligning with the ACFE 2014 Report to the Nations research describing employee fraud awareness training as an extremely effective way to reinforce fraud policies, encourage anonymous tips from whistleblowers and establish compliance.WATCH VIDEO
Fraud in Charitable Non-Profit Organizations | Ralph Q. Summerford
Ralph Summerford, president of Forensic Strategic Solutions, cites recent New York Times statistics to help reveal some reasons for the high frequency of fraud in non-profits, including high turnover, poor management and lack of tax audit enforcement. All of these issues make it increasingly difficult for the IRS and law enforcement to uncover and prosecute […]WATCH VIDEO
Financial Fraud Investigations: Why an Employee’s Vacation is a Great Time to Detect Fraud | Lindsay H. Gill
Time off isn’t just a necessity to help employees recover and regroup, it’s also an opportunity for an organization to measure its efficiency and to uncover vulnerabilities it may face from fraud, waste, and abuse. Here are just a few of the ways an organization can leverage its vacation and time-off policies to help detect […]READ FULL BLOG
In a Financial Fraud Investigation, It Pays to Follow the Digital Footprint | Lindsay H. Gill
Fraudsters often believe they have covered their tracks so well that their activity is untraceable, but they are increasingly running into a significant obstacle when attempting to hide their crimes: Their digital footprint. During the last decade, people have integrated digital tools into their personal and business lives at an astonishing rate. Since 2010, for […]READ FULL BLOG
Unlocking the Potential of Electronically Stored Information to Determine Lost Profit Damages | Kelly J. Todd
At many small businesses, it’s not uncommon to still find a mass of paper records, yellowing with age and haphazardly tossed in boxes, as well as old-school computers and dot-matrix printers with tractor feeds and green bar paper. Yet even the most unorganized and technologically unsophisticated small business may contain a trove of useful electronically […]READ FULL BLOG
Fraud Examination: Protecting Your Business from Workplace Fraud | Kelly J. Todd
Despite the distractions and upheaval the Covid-19 pandemic has had on your business, be careful not to overlook another threat that could be looming around the corner — fraud in the workplace. Occupational fraud is the misuse of one’s occupation for personal gain and includes anything from stealing office supplies to cooking the books to […]READ FULL BLOG
What Beneficiaries Can Do to Help Spot Fraud in a Trust or Estate | Lindsay H. Gill
It’s an all-too frequent concern for people who are no longer managing their own finances: Are they being taken advantage of by a trustee, executor, or attorney-in-fact—and what can they do to spot and prevent such activity? At Forensic Strategic Solutions, we are often approached by beneficiaries or their loved ones to investigate possible trust […]READ FULL BLOG
How to Prevent Workplace Corruption and Collusion? Think Like a Financial Fraud Investigator | Kelly Todd
When financial fraud investigators discuss corruption in the workplace, they are usually referring to a single employee who is exploiting their position for personal benefit. Collusion, however, involves multiple people working together to abuse their power. When a collision occurs, the damage to a company’s finances and reputation multiplies. And pinpointing the perpetrators and the […]READ FULL BLOG
The Shift to Teleworking: Protecting Your Business Data from Fraud | Kelly Todd
The mass exodus of employees from traditional offices in the wake of the COVID-19 pandemic and the growing ease with which information can be moved and shared has made one thing clear: Businesses are facing a risk-filled new frontier when it comes to their data security. The rapid shift to telework has only expanded the […]READ FULL BLOG
Eight Tips for Detecting Fraud in Accounts Payable | Lindsay H. Gill
According to the Association of Certified Fraud Examiners 2018 Report to the Nations, fraudulent disbursement schemes remain the costliest form of asset misappropriation fraud to threaten small businesses. Although this risk can seem overwhelming, it may be avoidable through taking proactive steps against fraud within your company. Here are eight tips to help you expose […]READ FULL BLOG
The Power (and Variety) of Data in Forensic Investigations | Lindsay H. Gill
Time and time again, we trumpet the incredible value of advanced data analytics in forensic investigations – often, it is the key to finding the needle in the haystack. Fortunately, our firm remains at the forefront of utilizing data to identify unexpected patterns when investigating financial fraud – that red flag that tells us something isn’t as it should be – whether for a qui tam case involving kickback schemes or a case of underreported revenue.READ FULL BLOG
Detecting Deception: Gathering Evidence and Seeking Admission | Kelly J. Todd
OPEN is a key word to remember when detecting deception. Open body language – and an open mind – are your best friends when looking for the truth. An open mind is going to help keep you in the “information-gathering” mode, which usually proves to be more effective than the gruff interrogation techniques you’ve seen […]READ FULL BLOG
Detecting Deception: Body Language | Kelly J. Todd
Now that we’ve peeked behind the curtain of speech and facial expressions, it’s time to move on to body language. But before we focus on our subject’s nonverbal cues, let’s shine the light on our own body language. Remember: when detecting deception, we aren’t looking for the lie – we are looking for the truth. […]READ FULL BLOG
Detecting Deception: Facial Expressions | Kelly J. Todd
THE FACIAL FAUX PAS Now that you have gathered your intel – you have your subject’s baseline squared away and you’ve peeked behind their words – it’s time to focus on the facial faux pas. There are many facial signs that are likely indicators of deceptive hot spots. When your subject’s expressions and gestures don’t […]READ FULL BLOG
Detecting Deception: Speech and Voice as a Lie Detector | Kelly Todd
Once we’ve established the baseline, it’s time to drill down to expose the meaning behind the words. While body language has long been the focus of detecting deception, research has shown that the analysis of a person’s speech may be much more accurate than merely observing non-verbal behavior. No matter the lie, there will always […]READ FULL BLOG
Detecting Deception: Calculating the Baseline | Kelly J. Todd
In my previous blog post, I noted that when assessing whether someone is lying, you must first consider the person’s baseline – their typical behavior. A LIAR IS CAUGHT… OR IS HE? Body language helps us identify a person’s stress signals of deception. The key word here is “helps” – body language is far from […]READ FULL BLOG
Detecting Deception: Common Myths | Kelly J. Todd
THE MASTER OF DECEPTION Bernie Madoff infamously stole $65 billion reflecting 4,900 client accounts in a Ponzi scheme. All told, his investors lost approximately $20 billion of real principal. How was he able to look hundreds of people in the eye without arousing suspicion, all the while knowing he was robbing them blind? This man […]READ FULL BLOG
Trust Your Employees, but Verify Their Actions | Kelly J. Todd
Our team recently wrapped up another sizeable fraud examination for a small business whose trusted bookkeeper embezzled hundreds of thousands of dollars. While the names and the faces of fraud change, the story remains the same: the employee you least expect, the most trusted of them all, takes advantage of their position – and you […]READ FULL BLOG
Best Practices for Employers: Conflicts of Interest | Kelly J. Todd
In my last blog, I discussed why corruption in the workplace always requires a conflict of interest. Conflicts of interest arise when employees have interests that may make it difficult to maintain one’s duty of loyalty to their company in an objective and effective manner. Quashing all conflicts of interest within businesses would be difficult to conduct; therefore, it is important to know how to reduce the risks inherent in conflicts of interest.READ FULL BLOG
Quickbooks Audit Trail: Fraudulent Behavior Detection | Lindsay H. Gill
The QuickBooks Audit Trail (or Audit Log, depending on the version) provides a log of each accounting transaction and denotes any additions, deletions or modifications affecting the integrity of the transaction. The tool captures every transaction from the time it is initially entered into QuickBooks, and tracks changes to the original entry, including transaction type, date, account, vendor/customer name, transaction amount, quantity, and price. The Audit Trail also reveals the User ID under which the entry, deletion or modification was made. The Audit Trail is a report built in the QuickBooks ReportCenter– all you have to do is click a button to generate the report.READ FULL BLOG
Why Corruption Always Requires a Conflict of Interest | Kelly J. Todd
When it comes to corruption, there is almost always a common denominator: a conflict of interest. A conflict of interest exists when an individual or corporation has the opportunity – real or perceived – to exploit their position for personal or corporate benefit. Corruption occurs when the individual or corporation takes advantage of that opportunity and indeed abuses their position for private gain.READ FULL BLOG
Social Media Evidence: Where to Look and Protocols to Follow | Lindsay H. Gill
As a digital technology expert, it is fascinating to observe how today’s technology-centric world obsesses over anything and everything digital – especially social media. From sharing locations on Instagram and Facebook to live tweeting events, people constantly update their friends – and strangers, if their account is public – on their every movement. Social media […]READ FULL BLOG
The Digital Footprint: Where to Look | Lindsay H. Gill
The world of technology offers the opportunity for fraud experts to trace the “untraceable.” With technology becoming more popular and present in our lives by the day, people are conducting their lives more digitally, whether through email, texting, social media or Internet browsing. Collecting, analyzing and interpreting the electronic evidence of fraudulent activity is becoming more widespread in the fraud examination world, and will most likely soon become the standard.READ FULL BLOG
Fraud Suspected in the Workplace? Employers, You Better Read This – Part Two | Kelly J. Todd
When you think of fraud within an organization, a newer employee may be top-of-mind, but according to the Association of Certified Fraud Examiners (ACFE), seven percent of perpetrators committed fraud during their first year and more than 53 percent had been with their organization for more than five years.READ FULL BLOG
Fraud Suspected in the Workplace? Employers, You Better Read This – Part One | Kelly J. Todd
There’s no way around it—according to the Association of Certified Fraud Examiners, an estimated five percent of annual revenues are lost to financial crime. What do these numbers mean for you? Big or small, public or private – with statistics like these, there’s a good chance your business is more likely than not to fall victim to internal fraud.READ FULL BLOG
Technology Talk: Active Data for Excel | Lindsay H. Gill
We all recognize budget is a constant concern for auditors and investigators. Oftentimes our technology budgets are just too tight. We find ourselves looking for powerful tools to add to our toolbox that do not break the bank. One of these tools is Active Data for Excel.READ FULL BLOG
Identifying Fraud Symptoms: What Really Goes on Between the Balance Sheets? Part II | Kelly J. Todd
Identifying fraud symptoms in financial statements requires observation and recognition. If you don’t look, you’re unlikely to find it. Worse yet, if you do look, are you sure you will recognize the symptoms of fraud?READ FULL BLOG
Identifying Fraud Symptoms: What Really Goes on Between the Balance Sheets? | Kelly J. Todd
Fraud, unlike acts of terror, murder, or bank robbery, is rarely observed. Instead, only symptoms or indicators, most often exhibited through changes in the financial statements, are present.READ FULL BLOG
Technology Talk: Excel Shortcuts | Lindsay H. Gill
I was recently surprised to learn at a team meeting that my peers were not as familiar with the many Excel shortcuts that I apparently take for granted. Urged by our team to share more, I decided I should share a few of the more frequently used Excel shortcuts with you:READ FULL BLOG
Cyber-security: Minimizing Internal Threats | Kelly J. Todd
Like a magician’s sleight of hand, the barrage of headline news related to hackers and cyber criminals may divert attention away from the equally dangerous, but perhaps less obvious, threat to your corporate assets: employees. While trusted employees are moving, sharing, and exposing corporate data just to do their jobs, the malicious employee may be deliberately taking confidential information for personal gain or other nefarious reasons.READ FULL BLOG
When Should You Start Looking for Fraud? | Kelly J. Todd
Larger organizations are more likely to experience fraud by an employee’s misuse of influence in a business transaction in order to gain a direct or indirect benefit. Small organizations, however, typically fall victim to the rogue employee who directly steals the organization’s assets or misuses its resources.READ FULL BLOG
B.Y.O.D. | Lindsay H. Gill
“Bring your own device,” or “B.Y.O.D,” is a concept that an increasing number of companies are implementing. B.Y.O.D allows employees to use their personally-owned devices in the work place. These devices can range from laptops and tablets to cell phones and flash drives. While B.Y.O.D may be a good plan in theory – employees can work with devices they are comfortable using – It is important for employers to thoroughly consider the implications and potential pitfalls before implementing a B.Y.O.D policy. Consider, for example, the following key areas regarding the security of corporate information and infrastructure:READ FULL BLOG
Social Media in Fraud Investigations | Lindsay H. Gill
There’s no denying it: social media has changed the way we interact with each other. People are tweeting live from events, “checking in” on Facebook, posting pictures to Instagram and commenting on, liking or sharing just about everything. The amount of personal information that social media users willingly put “out there” is staggering.READ FULL BLOG
Computer Forensics v. E-Discovery: What Every Expert Should Know | Kelly J. Todd
Increasingly, the answers to the most fundamental litigation questions – the “who, what, where, when, and why” – are contained in electronically stored information (ESI), which can be retrieved through electronic discovery (e-discovery) and/or computer forensics.READ FULL BLOG
How to Find Electronically Stored Information | Kelly J. Todd
In our case study, gas station owner, Morris, has alleged that Green Fuel, a small gasoline distributor, overcharged him. Both parties had inadequate and unsophisticated documentation, making determining losses very difficult.READ FULL BLOG
Electronically Stored Information: The Case Study | Kelly J. Todd
You might not think that a small business would have useful or accessible electronically stored information (ESI). Consider this example of identifying and obtaining relevant forensic evidence to determine lost profit damages with this particular small business.READ FULL BLOG
Unlocking the Potential of Electronically Stored Information | Kelly J. Todd
Think twice before you assume that an unsophisticated small business cannot possibly have any useful or accessible electronically stored information (ESI).READ FULL BLOG
Time off to discover fraud | Lindsay H. Gill
Regardless of the time of year, employees will always have reasons to come and go in the office. Vacations, conferences and meetings are a regular part of most employees’ daily schedules. So rather than worrying about the empty chair they leave behind, take advantage of the time they take off to measure efficiency and expose […]READ FULL BLOG
Preventing fraud during the holidays | Lindsay H. Gill
As we discussed in last week’s blog post, there can be more fraud during the holiday season for a variety of reasons. A few quick steps you can take to reduce your vulnerability to fraud include: Be present – The perception of detection is often one of the strongest controls against fraud. Business owners need […]READ FULL BLOG
Why is there more fraud during the holidays? | Lindsay H. Gill
Fraud happens all the time, but the holiday season provides situations that people may try to take advantage of. The “fraud triangle” has three points to it: Need or Greed Opportunity Rationalization During the holidays, we often see changes in two of these points: increased need or greed and increased opportunity. People want to be […]READ FULL BLOG