The importance of the audit trail in QuickBooks Online.

In the small and medium enterprise section, audit trails are the most under-utilized segment in accounting software. Although this is my opinion, I base my opinion on a day to day experience in practice. A lot of clients would not be able to tell you what it is or what it means. Many clients would be able to give you the theoretical meaning of an audit trail but would not have used it at all.

In general audit trails are used by corporate companies and auditors, internal and external. I believe this is a function that can be used by owners and managers in small and medium businesses in a positive and negative way: to strengthen their internal structures, procedures and ethical outlook on business or alternatively, fraud and other unnecessary investigations. If it is used effectively in a positive manner, negative outcomes would be eliminated.

Definition of an audit trail

According to Wikipedia an audit trail (also called audit log) is a security-relevant chronological record, set of records, and/or destination and source of records that provide documentary evidence of the sequence of activities that have affected at any time a specific operation, procedure, or event.

In laymen’s terms it’s a recorded list or history of each financial transaction as it is added, changed or deleted. It allows you to track every step of a transaction.

Criteria for an effective audit trail

For an audit trail to be effective it should have the following unconditional criteria:

• It should only be accessed by someone with full access to the system, in other words an Administrator.
• It must not be able to be disabled, altered or deleted.
• Information included should be searchable.
• Information included should be usable and informative.
• Information included should be reliable.
• Information should include the date of the transaction, the name of the user that executed the transaction, the type of transaction or event, the name of the customer or supplier related and if a change has been made, all information of the original transaction.

Unfortunately, an audit trail on an electronic accounting system is limited to the completeness of information entered. If information was excluded in the process of entering, this information would not be available in the audit trail. This is one area where the routine procedure to put as much information as possible into the electronic system and completing the entire accounting process can be a positive in your business and develop a good company culture.

Evaluating the audit trail of QuickBooks Online.

So often I hear that QuickBooks accounting software has a game changing ‘flaw’ in its development for you can manipulate transactions after it has already been captured, in other words: you are able to change or alter the original transaction. This was a ‘flaw’ in all the desktop versions and is a ‘flaw’ in the now buzzing QuickBooks Online as well. Competitors of QuickBooks love to use this as ammunition when trying to convince a client not to subscribe to the best online accounting software in the world.

But is this a ‘flaw’ or is it the intention of the developers to allow this option.  And what counter measure do they have for this allowed ‘flaw’?

QuickBooks has recognized that everybody has a job to do. Owners and employees need to make money. Accountants and auditors need to report. By saying that, for who was the software developed? The owners of the business. QuickBooks was developed to do accounting books quickly and easily, allowing owners the functionality that is easy to use for non-bookkeepers. Thus, it is true that you can edit and manipulate transactions. But this is a feature in QuickBooks, rather than a ‘flaw’.

How do the developers counter this issue? This is done by a great audit trail based on a brilliantly developed accounting software that is totally reliable. The first step, like in any accounting software, is to make sure that the option of user rights exists. Although I believe the options for user rights can be extended immensely, the basics are there, and an administrator can be differentiated from a normal user.

The audit trail (in QuickBooks it’s called audit log) can’t be disabled, altered or deleted in any way. All info that it supplies are relevant, useable and informative. And as with anything in QuickBooks, the intended information is searchable via its filter function. On an edited/voided/deleted transaction the history can be viewed. All information from the original and edited transaction are supplied, as well as who captured the transactions and all information related to it – what a great feature!

In conclusion

A happy client is a good client! Technology is here to stay, but we as accountants can assist our clients by supplying them with the most customer friendly software available. We as accountants can use the other options within the software to get our jobs done. Audit trails are also not just for accountants, but owners and managers can use it to. Inform your clients of the audit trail and teach them how to use it. Its adding value without any cost involved.

Louis Aucamp, Professional Accountant (SA)