Employers, if you use QuickBooks for your company’s accounting needs, you have a built-in tool for fraud prevention and detection at no additional cost to you: the QuickBooks Audit Trail.
What Is It?
If you’re operating a software version of QuickBooks, you have the capability to run a built-in report called the Audit Trail. (For QuickBooks Online users, this report is called the Activity Log.) The Audit Trail lists each accounting transaction and any additions, deletions, or modifications affecting the accounting integrity of the transaction.
What Does It Capture?
The Audit Trail captures each transaction as it is initially entered into QuickBooks and certain subsequent changes made to the transactions. The Audit Trail may pick up changes to the following QuickBooks fields:
- Transaction Date
- Transaction Type
- Vendor/Customer Name
Additionally, the Audit Trail portrays the User ID under which the entry, deletion, or modification was made. (This is only as valuable as you allow it to be. See #3 in “What Steps Should I Take?”)
Is It Easy to Use? Yes! This report comes standard with QuickBooks – it’s already built for you in the QuickBooks ReportCenter. Just click a button to run the report. And it couldn’t be simpler to read:
- The Audit Report is grouped by unique transaction numbers. It includes the initial entry of each transaction and any subsequent changes to that transaction.
- When a transaction is modified or deleted, a “Prior” entry displays in system date/time order.
- Specific changes to each transaction are in bold so that you can easily determine the differences from the prior version of the transaction.
So, I Can Use It to Prevent and Detect Fraud?
Definitely. The QuickBooks Audit Trail is a powerful resource, and it’s right at your fingertips. At Forensic Strategic Solutions (FSS), we frequently encounter instances in which the fraudster has used QuickBooks to conceal his or her embezzlement. But the footprints exist, and the Audit Trail exposes them.
Transactions that have been modified, unauthorized, deleted, reclassified, and reversed: these are what FSS President Ralph Summerford identifies in his March 2012 blog post as “anomalies” indicative of fraud. The Audit Trail is the first report we run when examining QuickBooks files for potential fraud – it’s that valuable!
What Steps Should I Take?
As an employer, there are four simple steps you can take to be sure you leverage the capabilities of the Audit Trail to reveal the footprints of fraud:
- Enable It – In versions of QuickBooks prior to 2006, you have the option to disable the Audit Trail. Later versions no longer have this option. If you are operating on an earlier version, be sure the Audit Trail is enabled.
- Control It – Restrict QuickBooks user access so that no user has more rights than their job requires.
- Secure It – Enforce strict username and password security measures. Each user should have a unique username, and passwords should not be shared. Otherwise, the Audit Trail’s capability to track user activity is rendered useless!
- Monitor It – Periodically run the Audit Trail report to see what entries are being entered, changed, or deleted. QuickBooks allows for reports to be easily exported to Microsoft Excel if you prefer to work with them in this format.
Now that you know about the usefulness of the Audit Trail, don’t let it go to waste! It may just uncover some footprints…