CPAs who perform litigation support and forensic accounting services are retained as expert witnesses to provide reports and to testify on their reports on such matters as:
- Determining income of mother or father from an owned business for child support or spousal maintenance purposes,
- Determining lost profits of a business in owner disputes,
- Determining the value of a business in a marital dissolution or owner dispute, or
- Forensic accounting work to find fraud or theft committed in a business
To assist these testifying experts, an excellent tool for analyzing business income or loss, or for help in determining whether fraud or theft occurred in a business, is the accounting software known as QuickBooks™. QuickBooks is a popular software package used by a multitude of businesses in all types of industries to keep track of their accounting transactions and to publish their periodic financial statements.
CPAs who testify on financial and accounting disputes and allegations can use QuickBooks to do the following:
- Print multiple years of profit and loss statements side by side for comparison purposes. This will alert the investigator of unusual changes occurring in the accounts from one period to the next which warrant further investigation.
- Print multiple balance sheets side by side for comparison purposes. This will also alert the investigator of unusual changes in balance sheet account balances warranting further investigation.
- Print a list of payees to whom checks have been written. The list can then be reviewed to see which payees are known by management and which are not recognized – warranting further review.
- Prepare a list, by recipient, of total cash disbursed to the recipient for any period. This may determine fictitious recipients receiving unusually large sums of cash.
- Print a check register showing accounts affected by the writing of checks. For example, a check written to a supplier may end up being charged, erroneously, or by intent, to a customer’s receivable account.
- Use the Audit Trail function of QuickBooks to view changes made to accounts. This function can uncover intentional acts by perpetrators to change accounting transactions in order to hide theft of funds. Many users of QuickBooks are not aware of this function in the software.
- Examine all transactions within a particular account category such as accounts receivable, accounts payable, sales and travel expenses to determine if entries are logical or if they are being made to hide theft or prepare fraudulent financial statements.
- Print a list of customers with receivable balances. This can determine whether customers are current or whether someone put a fictitious receivable amount into a dormant receivable account in order to hide the theft of cash.
- Review consecutive bank reconciliations to see that they are being prepared timely and that the same checks and deposits are not appearing in reconciliation after reconciliation. This might be another red flag that fraud is occurring.
- Transfer schedules from QuickBooks to Excel spreadsheets for further analysis.
These are a few of the ways QuickBooks can be used by the CPA who is hired as an expert testifying witness.
By Donald R. Bays, CPA, ABV, CVA, CFF