Introduction
QuickBooks is by far the easiest program to use with the
most complicated and diverse applications in it that never get used by most
business owners. Fraud happens every day and as I have said before, small
businesses lose more money every year due to fraud than some of the largest
corporations. What a lot of Fraudsters, who happen to use QuickBooks don't know
is that every move they make, every step they take, is being 'watched' by the
QuickBooks software.
Prevention
The key to preventing fraud of course is making sure that it
is not the same person who handles more than one accounting function in a business.
You don't want the same person who is opening the mail, being the one who sends
the checks. You don't want the same person who can sign checks being the one
determining the amounts to put on the checks.
Upon setup, QuickBooks allows the business owner to set up
users. The owner should always be the Administrator, not the bookkeeper, not
the CPA or accountant, but the Administrator. Anyone else using the program can
be limited to the parts of the program that they can access by the Admin. Sales
persons needing to enter sales can do so, but they don't need access to the
bank account information. Purchasers need to be able to create purchase orders
and invoices, but not able to adjust inventory on hand or create checks to pay
for invoices. Only the admin should be able to make these adjustments. Name the
users of QuickBooks so you know who is doing what and when. This will give you
an eagle eye on the security of the QuickBooks transactions.
Detection
There is a little known feature of QB that is called the
Audit Trail. The Audit Trail records any changes made to original transactions,
any deletions of invoices, checks, etc. You'll want to do this when the place
is closed or when you have plenty of time because this report can take a very
long time to generate. Go to the Reports tab on the menu bar and click on it.
Find the Accountant's Reports and you will see the Audit Trail as one of the
options. Click on it and apply the dates you wish to check, (the longer the
period of time and more transactions, the longer the report will take) and
wait.
In the audit trail, if an entry has been altered or deleted
there will be two or sometimes three lines for one transaction. The one on the
bottom is the original entry, the one(s) above it have been altered or deleted
and the report will give what was changed, the payee, the amount, or an account
and tell you which user entered the original, which user changed it and the day
and time it was done.
So how do you tell if it's fraud or just someone making
changes? First, deleting an invoice should rarely be done, if there are a large
number of deleted invoices then chances are, your company is not using the
Estimates icon. The invoice should only be created when you know for sure a
customer is going to go through with the arrangement, if you are using the
invoice feature to send estimates, those estimates are posting to your accounts
receivable account which should not be done.
So how would someone commit fraud by altering an invoice? If
the same person that prints the invoices also sends the checks, it is very easy
to print the invoice for your approval at $200 or more than what was actually
invoiced for. Once you've approved what should be a $5000 invoice for $5200,
the clerk will change the $5200 to $5000 and send the vendor the right amount,
and at the same time issue themselves a check for $200 which would be written
off to another account somewhere in the books. The bank reconciliations would
always match and no one would be the wiser. This is one reason that you cannot
print an invoice without saving it first.
Another common method of fraud is altering the payee of
existing invoices to benefit the relatives, friends, etc of the crooked clerk.
So an invoice may come in that has been created at home and submitted to you
for payment by the person creating the invoice. Or, you may be cutting a check
for a legitimate expense only to have the funds redirected to the crooked
clerk.
You might also be on the lookout for checks being issued for
identical amounts, during the same period every week, every month, etc.
Sometimes the fraudster will send two checks to the same vendor and call up a
day later and ask the vendor to return the check 'mistakenly' sent. If the
fraudster is the same person who opens the mail, he will take the check and
'wash it' and make himself the payee. (If your bookkeeper seems to be
continually doing her nails, you smell nail polish remover constantly, your
company is at risk as that is what is used to remove ink off of checks) You can
catch this by exporting the check detail to Excel and sorting it according to
amounts, if you have one or two more checks a month for identical amounts, call
your bank and ask for a copy of the cashed checks, front and back. The back of
a check tells you which bank cashed it, and often, the name of the person who
cashed it as well.
If you get your bank statements already opened by your
bookkeeper, watch for checks that have cleared but that aren't placed into the
envelope with the statements. Compare your bank register to the images of the
checks on the statements and confirm that the person or company you wrote the
check to is the actual person or company that cashed the check.
Conclusion
If you take the basic precautions, it makes this kind of
fraud much harder to commit. But you have to be vigilant and ready to take
action should fraud be occurring in your business. Remember, however, that this
is America, home of the Free Land of the Lawsuit. NEVER directly accuse your bookkeeper
of stealing, especially in front of others. Find the services of a Certified
Fraud Examiner in your area and they will be able to help you put a successful
case together for prosecution, should you choose to go that route.
David Roberts, CFE, CQBPA, MBA, lives in Kissimmee, Florida
with four girls, three dogs, two snakes and one wife. He has been a member of
the ACFE for four years and has been studying fraud for longer than that. He is
the owner of Homesoon Accounting Services which specializes in Quickbooks
Consultations and Fraud Prevention and Detection.
Nancy
Smyth is a Qualified QuickBooks ProAdvisor and Intuit Gold Designer
specializing in providing QuickBooks clients an effective simple efficient way
of complying with Federal and State Prevailing Wage Laws create certified
pay-roll views from QuickBooks details. For more details regarding Qualified
Pay-roll Solution-QuickBooks Support Phone Number
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