Accounting Fraud Prevention Using Quickbooks

See Also:
Accounting Depreciation
Account Reconciliation
Cash Flow Projections
How to Develop a Daily Cash Report
Future of the Accounting Workforce

Accounting Fraud Prevention Using Quickbooks

A small business owner typically cannot afford to hire enough people to have proper separation of duties to gain the internal controls needed to prevent accounting fraud.

Using Internal Controls

Stephen King, CEO of GrowthForce, says that, “Internal controls can help reduce the risk of fraud, make it easier to train and manage staff, and help your company run efficiently by having solid processes and control activities in place.” The place where most companies encounter fraud is in their own company, so it’s critical that every company sets up internal controls and continues to update them as changes occur.

Download eBook The CEO's Guide to Reducing Fraud

Prevent Accounting Fraud

Every business owner can achieve accounting fraud prevention by taking these simple steps:

1. Open the Bank Statement Yourself

Every small business owner should receive the unopened bank statement. Then they should review each check for authorized payee and signature and approve electronic payments. Only after they do the above should they give it to the bookkeeper.

2. Don’t Let Your Bookkeeper Reconcile the Bank Account

The person who pays the bills should never reconcile the bank account. That’s how they cover their tracks. If you don’t have someone else to do it, then this is an easy function to outsource.

3. Close the Prior Accounting Periods

QuickBooks now has a way to lock down the prior periods. Once you produce a financial statement, that period should be “closed”. As a result, this reduces the risk of hiding a fraudulent transaction in a prior year.

4. Attach Scanned Images to Each Accounting Transaction

Most fraud occurs from check tampering. For example, the bookkeeper changes the payee to themselves. Prevent accounting fraud by scanning the bill and linking it to each accounting transaction inside QuickBooks. Thus, this makes it harder to fake a bill.

5. Set Up Username for Each User

QuickBooks now has an audit trail report which can never be turned off; however, if your staff login as “Administrator,” then you have no idea who made what entry. Set up a username for each user that way you can track who did what and when.

6. Restrict User Access

QuickBooks Enterprise Solutions has the ability to restrict access per user per screen. Make sure you have separation of duties between authorization, record keeping, and custodial responsibilities for each accounting transaction.

No system of internal control should be built on trust. The best accounting practice is to separate out the following functions: authorization, record keeping, and custodial responsibility for assets in each accounting transaction.

The CEO's Guide to Reducing Fraud

Originally posted by Jim Wilkinson on July 23, 2013. 

accounting fraud prevention using quickbooks, accounting fraud prevention

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One Response to Accounting Fraud Prevention Using Quickbooks

  1. The Vitalic System April 1, 2015 at 5:17 am #

    Nice post. Thanks for sharing these steps that can help business owners to achieve prevention from accounting frauds through quickbooks.

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