Story time
Our experts once served on a case to critique the claimed replacement value of a destroyed piece of property. This is commonly known as a cost approach. To support their calculation, claimants produced their QuickBooks file. Earlier, claimants produced their financial statements. Based on their form, we knew that these financial statements had been extracted from QuickBooks. A cursory examination of the financial statements showed there were significant changes between the QuickBooks files we had and the historic financial statements.
Accountants will often make correction as part of closing, errors will be made and corrected, transactions will be reclassified. That did not warrant investigation. What was cause for investigation was the scope and scale of the changes.
QuickBooks records changes made to its underlying data. Our experts ascertained that the claimant’s CFO had spent two weeks leading up to the production making changes. Transactions had been deleted, dates changes, dollar amounts changed, accounts changed. There were thousands of transactions going back 5+ years that had been manipulated just before production.
What is an Audit Trail?
In addition to recording all transactions in the chart of accounts, QuickBooks records every transaction change in an audit log. This allows an investigator to see (not a complete list):
- How the transaction was changed
- When the change was changed
- The user that made the change
- Prior versions of the transaction
- Whether a transaction was deleted
If you have concerns regarding spoliation of an opposing party’s accounting records, request the records be produced in their native QuickBooks format. In addition to their reporting power built into QuickBooks, this will allow your forensic accountant to run an audit report so you can either (i) have some assurance that spoliation has not occurred, or (ii) examine and document the changes.
Related article: Producing QuickBooks Desktop is Easy
Related article: Producing QuickBooks Online is Easy
What should I do?
Hire an expert (like us). You will save time and money because:
- Audit Trail reports can run for thousands of pages. We routinely use Audit Trail reports, and our experience allows us to meaningfully narrow the focus of these Audit Trail reports. It minimizes wasted effort.
- Our training and experience as accountants allows us to quickly assess whether the changes had a meaningfully impact on the overall nature of the transaction and their presentation in the company accounting records
- We can testify as an expert witness if these investigations yield meaningful results.