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QuickBooks CPA offers QuickBooks fraud prevention tips

QuickBooks CPA tax accountant. QuickBooks fraud.

Intuit QuickBooks CPAs know they didn’t become the accounting software industry leader by accident.  There are other successful programs out there, but these flourish in companies large enough to have their CPAs on staff, or as their CFOs.

Prior to QuickBooks, in my experience, there were no well supported accounting software programs. I’m talking DOS here. As Intuit’s QuickBooks became the de facto bookkeeping and accounting software of choice, local experts became available. QuickBooks’ user friendly interface and local support allowed accounting data to finally be used for managerial purposes in small companies.

Desktop QuickBooks and Online QuickBooks are very different. I’m discussing the desktop version here.

QuickBooks’ fantastic flexibility eventually cornered the market. Earlier bookkeeping and accounting software programs had a rigid interface that required true double entry accounting, which few laymen understood. They were hard to setup, required seemingly non-logical conventions, and mistakes were a nightmare to correct. Think writing in pen with no whiteout in sight!

“It’s easier to commit fraud in QuickBooks than most software, so you end up sacrificing some of its flexibility for fraud prevention.”
– Gary bode, QuickBooks CPA tax accountant

However, QuickBooks user-friendliness eliminated many of the usual and customary accounting controls to accomplish this.  It didn’t support sequestering of users from sensitive program areas, it was easy to create duplicate accounts, easy to post to the wrong type of account, easy to delete transactions, etc.

But much of that has improved over the years, thanks to several updates to the software.  But, because of its flexibility, it is still one of the easier software programs to commit fraud with, especially in the more basic versions.  So, one the first things to decide on is what version of Intuit QuickBooks to buy.  And one of the factors has to be the potential fraud risk when the company’s owner isn’t doing all the bookkeeping.

“When I taught QuickBooks online at  Baker College, the discussions on fraud and embezzlement drew the most discussion”
-Gary Bode, QuickBooks CPA tax accountant.

The next step is to configure QuickBooks bookkeeping such that inadvertent errors and intentional fraud are less likely to occur.  Help from a QuickBooks CPA is probably prudent.  No QuickBooks NC enjoys talking about embezzlement, but it does happen.  The frequency is unknown because it sometimes goes undetected or, if detected, unreported to the police.  We feel one in seven small companies with employees experience it.  We’ve even seen it happen multiple times to the same company!  Quick Books’ flexible accounting interface sometimes allows employees to stumble into potential fraud scenarios if it is not setup properly.  Of course other accounting controls should be in place too.

Consolidating Companies

We do a lot of tax work for consolidated entities where several companies are intertwined. For fraud prevention one QuickBooks file is better. QuickBook’s class feature makes than easy to do.

Anyone will steal under the right circumstances

In business school, you learn that some people will cross into the shady realm of dishonesty given the right circumstances.  You don’t have to be a QuickBooks accountant to understand why. For example, Mary Bookkeeper is an honest, church-going lady who’s worked for you loyally and diligently for years.  She’s more like family than an employee.  The CPA trusts her.  But recently, her circumstances have changed.  Her husband lost his job six months ago and even with Unemployment, money is tight.  Her small child has been sickly, with lots of required prescriptions.  Now an expensive antibiotic is required two days before payday.  Mary doesn’t have the money.  Her credit cards are maxed out and she doesn’t qualify for Medicaid.  For years, the petty cash fund has seldom been reconciled.  The money is there and she only needs it for two days.

So the circumstances here are that Mary Bookkeeper’s love for her sick child has become more important than her ethics and loyalty to Wilmington NC Widgets or the CPA.  AND the employer allowed circumstances that made it easy, and perhaps undetectable, for her to “borrow” the money.

“Fraud prevention is better than fraud detection. Why? Most cases of fraud never get any money or property back.”
– Gary Bode, QuickBooks CPA


  • There is no way to prevent all fraud.
    • Auditors even tell you that in their reports.
  • Pick a version of Intuit QuickBooks that is appropriate for your business with features like:
    •  An audit trail. This shows every transaction and who made it. Good for detection, not so good for prevention.
    • Restrictions to certain areas of QuickBooks.
      • All QuickBooks CPAs shoot for separation of duties e.g. the person entering the bills doesn’t have ability to pay them.
    • QuickBooks data can help run the company, so fraud prevention.
  • And then have someone who knows the common fraud schemes set it up for you.
    • Gary states most employees don’t see this as automatic suspicion, but more like that the company cares enough about employees to prevent suspicion from falling onto them.
  • Have a company policy that all theft is reported to the police.
  • Lead by example.
  • Reconcile QuickBooks yourself every few days to your online bank statement while the transactions are fresh in your mind.
  • Look at the accounts payable documentation before paying them.
  • Look at employees. Is there some name you don’t recognize? Look at the salaries.
  • Reconcile the company credit cards.
  • Look at your inventory.
    • See if the part even exists.
  • Setup regular QuickBooks mini audits. A spouse not otherwise involved in the business is a good candidate here.
    • Spot check correlating a few vendor bills to payments.
    • Spot check payroll records, although most time fraud happens outside of QuickBooks.
    • Spot check accounts payable. Spot check accounts receivable.

Here’s the strangest fraud I’ve seen

Before I became a CPA I was paying high prices for payroll administration and financial statements I didn’t understand. She explained the entire payroll tax reporting process in 10 minutes. Later I went on to become payroll mater for a salary based company of 3.5 million dollars annually. Years later the local newspaper ran a story about her being convicted for fraud. She produced phony IRS Notices and collected the fictitious tax, penalty and interest.

For help with setting up your QuickBooks system or for a free consult, please call us at (910) 399-2705.
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