Our team has been involved in multiple cases where the end client needed to produce QuickBooks accounting records but, for perfectly legitimate reasons, did not want to disclose any more data than strictly necessary. This led to the question: Can you produce a QuickBooks file with only select periods included?
The answer is yes — but it may create significant problems.
Why would you need QuickBooks in the first place?
QuickBooks Desktop, developed and marketed by Intuit, is the dominant accounting software for small and medium-sized businesses. Accounting records are often central to litigation and are commonly relied upon by expert witnesses. For example:
- Accounting records may establish revenue and avoidable costs in lost profits or disgorgement claims.
- Income statements, balance sheets, and supporting details are critical in business valuations.
- Transaction-level data may need to be analyzed against other records in forensic audits (also known as “special purpose” audits).
Related article: Producing QuickBooks Desktop is Easy
Option #1:
QuickBooks includes a built-in tool to export transactions into a new company file. This allows users to exclude specified transactions or transactions outside a defined date range.
However, this process can introduce serious issues.
Option #2:
QuickBooks also offers a feature to condense transactions prior to a selected date into a single summary journal entry. This method helps avoid some of the balance sheet integrity problems of Option #1, but it still carries significant risks of data integrity issues.
A word of caution
Although QuickBooks includes these export and condense tools, they are not completely reliable. In our experience as accounting expert witnesses, we’ve encountered many QuickBooks files processed through these tools that contained clear and significant errors. In one case, opposing counsel failed to exercise due diligence, and we documented the inaccuracies — ultimately resulting in the court ordering the production of the unmodified QuickBooks file.
Common Pitfalls
- Balance Sheet Integrity: Balance sheets summarize all activity from a company’s inception through the report date. If transactions are removed or condensed, key account balances — such as receivables, payables, inventory, fixed assets, notes, and equity — may be incomplete or incorrect.
- Audit Trail & Deleted Transactions: QuickBooks’ audit trails and deleted transaction logs may be altered or incomplete after using these tools — a critical issue in forensic investigations or suspected misconduct cases.
- Unintended Data Changes: Sometimes, data extraction or condensation causes unintended changes within the file. Given the size and complexity of most QuickBooks files, identifying and correcting these issues can be time-consuming and expensive.
Intuit acknowledges these risks and advises users to proceed with caution. - Legal Risks: There is a valid argument that QuickBooks files altered by these tools may not qualify under the business records exception to hearsay rules because they were not maintained in the ordinary course of business. We have seen this argument succeed in court.
Related Article: Spoliation of QuickBooks Records
You got the QuickBooks file, now what?
Hire an expert (like us). As an expert, we will save you time and money because:
- We already have the QuickBooks software purchased and loaded onto our systems
- We already know how to use QuickBooks, and have decades of experience using it
- We already have the requisite experience to know which of the hundreds reports to run to get meaningful data
- We already know how to run customized queries/reports to answer questions specific to your case
- We already know how to perform analyses using accounting records that your case may require
We can provide expert witnesses testimony in a simple, efficient manner so that triers of fact can understand otherwise complicated subjects