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Quickbooks Audit Trail – Who Needs It?

April 12, 2012 by Ed Becker

A few years ago, the QuickBooks Audit Trail feature could be turned on and off. However, in the most recent versions of QuickBooks, the feature is always on. Even the administrator can’t turn it off. It has its drawbacks, but for the most part, it is a very useful feature, albeit under-utilized.

What does the QuickBooks Audit Trail do?

This feature automatically tracks all the additions, deletions, and modifications made to transactions in your data file. A report allows you to list all these changes going as far back as the audit trail feature existed. These reports are of course humongous, but tools allow you to filter the report to zoom in on the transactions of interest to you.

The implication is that ANYTHING you do in QuickBooks leaves a trail and can be identified. Which is a good thing in case you ever need to see what your bookkeeper has been doing.

The Downside of the QuickBooks Audit Trail

There is nowhere to hide: if you made a mistake, you can undo it, but you can’t cover your tracks. Auditors love seeing these meanderings because it might be a sign of data manipulation. However, if your intentions are all good, there is nothing to worry about. But everyone makes mistakes so if unintentional, then don’t worry.

Positive #1: Training

If there are multiple people using QuickBooks, the Audit Trail feature is great. The most common example is when User A modifies or deletes a transaction that had already been reconciled by User B. This breaks the reconciliation, but nobody will notice until the following month when someone tries to reconcile the previous month and the opening balance is off. A discrepancy report will immediately show which transaction was modified or deleted and the audit trail will show that it was User A who did it. This will allow to fix the issue and train User A to not repeat the mistake.

Positive #2: Fraud Prevention

Needless to say that the audit trail is instrumental in preventing and identifying fraud. The mere fact of making your employees and bookkeepers aware of the existence of the audit trail will already discourage fraud, but if fraud happens, you now have your forensic tool.

Positive #3: Your Bookkeeper May Not Know

This is a great tool for your outside bookkeeping service or CPA to periodically review. It is your business and flying blind is not an option, your or an expert should be watching as finding out after the fact that theft has occurred is not a recommended best practice.

The Scoop

For the training and fraud control objectives to be met, each user needs to log into QuickBooks using his/her own user name. If everybody logs in using the admin user name, the audit trail will tell you how the inappropriate transaction was made, but it won’t tell you who did it. Make sure to create distinct user names for each user and to keep the passwords confidential. Review it and act promptly.

It’s only a great tool if you use it, don’t find out too late!

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