I have seen too much QuickBooks fraud to remember.
A new bookkeeper tried to cover his tracks by backdating embezzlement entries to before he arrived. At the time, he was among the many who did not know that QuickBooks already had an always-on audit trail. Turning it on simply made QuickBooks begin tracking CHANGES to existing entries, in addition to letting you see the audit trail report (without changes) from the date someone began using the QuickBooks file. I told the business attorney this. He later said that the bookkeeper confessed and went to jail, after seeing the actual entry dates of the backdated entries.
QuickBooks fraud often involves bookkeepers paying personal utility, gas and other bills, possibly by not entering proper payee names in QuickBooks. An annual income statement, which compares each month to the same month last year, helps catch this and other improper expenses. One bookkeeper promised to repay a company owner $50,000, with a second mortgage on the bookkeeper's house, when caught using QuickBooks this way. As we were leaving, he also offered to deliver an overdue company electric check. It was overdue because the bookkeeper used prior company electric checks to pay his personal electric bills. However, the bookkeeper then substituted his own account number, for the company account number, on the new check. The electric company would not change this initially, though the amount was ten times what the bookkeeper owed when he submitted the altered company check.
QuickBooks fraud also often involves pocketing cash sales. Intuit facilitates this by letting users print invoices and delete them, without first saving them to the audit trail. It finally got a preference to require saving, but it is (was?) off by default. Intuit executives know this often happens, but their lack of integrity (once Intuit’s #1 operating value) lets them keep helping owners commit tax fraud in this way.
The above type of annual – monthly comparative income statement also lets me spot frequent QuickBooks petty cash fraud. This involves repeat submission of the same receipts. Other QuickBooks frauds showed stolen inventory or receivables. Receivable fraud (or bad bookkeeping) shows up in accounts receivable aging reports, especially when you change the periods to 90, 360. Fortunately, the QuickBooks Accountant Edition can quickly and automatically fix many cases where the original sale and the later collection were both credited to income. This automatic fix also applies to accounts payable, sales tax payable and payroll tax payable, where both the initial recording and later payment result in duplicated expenses.
A bookkeeper and a manager used QuickBooks to steal $250,000+, while an owner was out trying to recover from a liver transplant. They covered this by not paying about this much in payroll taxes. I got extensive affidavits and other documents, to prove the owner was not available at the time of these thefts. These convinced the Internal Revenue agent. However, a ridiculously incompetent supervisor insisted on assessing the taxes against the owner. IRS, of course, collected nothing because, by then, the owner had nothing, but these types of cases led to our getting the Internal Revenue Taxpayer Advocates.
Annual – monthly comparative income statements and QuickBooks Accountant Edition fixes are very good, but AuditMyBooks is even better at catching Quickbooks fraud and errors. This is the newest of my Amazing QuickBooks Add-ons.