Scrutinize | Transaction Flags

Accounts Receivable Credits

Description: Credit Memos or Journal Entry credits booked to the Accounts Receivable account. Excessive credit entries booked to the Accounts Receivable account that are not related to receipt of payment can be a sign of fraudulent schemes or improper accounting procedures.
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Remediation: Each non-payment credit to the Accounts Receivable account should have supporting documentation attached to the transaction that includes a sufficiently detailed explanation of the transaction and identifies the responsible party.

Checks to Vendors with Bills

Description: Checks written to Vendors that are booked directly to expense accounts for Vendors who also have Bills booked to the Accounts Payable account. Vendor payments should be applied directly to their Bills instead of booked directly to an expense account. This pattern can signify overstated expenses, overstated Accounts Payable balances, incorrectly applied Vendor payments, or potentially fraudulent activity.
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Remediation: If the Check was supposed to be a payment for a Bill that already exists in Accounts Payable, create a Vendor Credit for the same date as the Check and book it to the account where the original Check was booked. If the Check was for a Bill that has not been entered, enter the Bill as normal, then create a Vendor Credit for the same date as the Check and book it to the account where the original Check was booked. In either instance, attach supporting documentation on each transaction that references the other linked transactions.

Customer Names in Expenses

Description: Transactions booked to an expense account, but tagged with Customer name. There is usually very little overlap between Vendor and Customer names. Often this signals that a deposit or return was incorrectly recorded.
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Remediation: Review the transaction to determine whether it should be tagged to a Vendor name, or is incorrectly categorized as an Expense instead of a Refund to a Customer.

Deposits from Customers with Invoices

Description: Deposits from Customers that are booked directly to income accounts for Customers who also have Invoices booked to the Accounts Receivable account. Customer deposits should be applied directly to their Invoices instead of booked directly to an income account. This pattern can signify overstated revenue, overstated Accounts Receivable balances, incorrectly applied Customer deposits, or potentially fraudulent activity.
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Remediation: If the Deposit was supposed to be a payment for an Invoice that already exists in Accounts Receivable, create a Credit Memo for the same date as the Deposit and book it to the account where the original Deposit was booked. If the Deposit was for an Invoice that has not been entered, enter the Invoice as normal, then create a Credit Memo for the same date as the Deposit and book it to the account where the original Deposit was booked. In either instance, attach supporting documentation on each transaction that references the other linked transactions.

Duplicate Checks

Description: Check transaction types from the same bank account that share the same transaction number as other Checks. All transactions should have unique identifying transaction numbers. Duplication is often a clerical error, but can signal more serious issues.
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Remediation: Review the duplicate Checks and supporting documents to assess which one(s) may need to be updated or voided.

Duplicate Invoices

Description: Invoice transaction types where the Invoice transaction number is the same as other Invoices. All transactions should have unique identifying transaction numbers. Duplication is often a clerical error, but can signal more serious issues.
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Remediation: Review the duplicate Invoices and supporting documents to assess which one(s) may need to be updated or voided.

Expenses with No Payee

Description: Expense transaction type with the no payee name. All transactions should have a name associated with them that corresponds to the other party in the transaction. Transactions without proper names are often clerical errors, but can be used to cover up fraud.
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Remediation: Update the name field of the transaction with the appropriate name.

Inconsistent Vendor Coding

Description: Transaction tagged to a Vendor where the account selected is inconsistent with where other transactions to this Vendor are booked. This can often be a sign of a clerical error.
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Remediation: Review the transactions for this Vendor to ensure they are booked to the correct accounts.

Missing Invoices

Description: Gaps in the sequence of numbers for Invoice transaction types. This happens most often when someone deletes an Invoice that should have been voided. However, sometimes it is related to invoices that have been issued outside the system, but not yet booked, which leads to understated income and accounts receivable. In more serious cases, it can be used to cover up internal fraud.
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Remediation: Ask the members of the team who issue invoices if they know how or why this happened. If you find that the invoice was issued, but not recorded, create an Invoice transaction type to record the transaction in the ledger with the appropriate information. If the invoice needs to be voided, create an Invoice transaction type with that number in the ledger, then void it out so the sequence is preserved.

Unapplied Payments

Description: Payment transactions that still have an open balance because they have not been fully applied against a receivable. Often this is caused by not applying a payment against an outstanding receivable, but can also be a pre-payment or overpayment.
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Remediation: Check outstanding receivables for the customer that made the payment to see if there are any balances the payment should be applied against. If not, document whether it is an overpayment or pre-payment so it can be refunded or applied at a later date.

Uncategorized Assets

Description: Transactions booked to the "Uncategorized Assets" account. Transactions should be booked to descriptively named accounts and not parked in suspense accounts. Amounts left in these accounts can signal poor internal communication and lack of attention to detail.
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Remediation: Find the team member responsible for booking the transaction to this account, and ask them why it is there. Once the necessary level of information is provided, move the transaction to the correct account.

Uncategorized Income

Description: Transactions booked to the "Uncategorized Income" account. Transactions should be booked to descriptively named accounts and not parked in suspense accounts. Amounts left in these accounts can signal poor internal communication and lack of attention to detail.
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Remediation: Find the team member responsible for booking the transaction to this account, and ask them why it is there. Once the necessary level of information is provided, move the transaction to the correct account.

Unreconciled Credit Card Transactions

Description: All unreconciled credit card transactions. These transactions should be inspected to identify whether they were incorrectly added to the credit card account or if the account needs to be reconciled more frequently. If a transaction appears to have been unreconciled for a significant amount of time, it could be a duplicate or booked to the wrong credit card account.
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Remediation: Start by reconciling the credit card account through the most recently closed period. Then, ensure that the transaction is booked to the correct credit card account by reviewing the credit card statements or other supporting documentation. Next, void the transaction if it is determined to be a duplicate.

Vendor Names in Income

Description: Transactions booked to an income account and tagged with Vendor name. There is usually very little overlap between Vendor and Customer names. Often this signals that a deposit or return was incorrectly recorded.
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Remediation: Review the transaction to determine whether it should be tagged to a Customer name, or is incorrectly categorized as Income instead of an Expense.

Checks to Cash or No Payee

Description: Check transaction type with the payee name "Cash" or with no payee name. All transactions should have a name associated with them that corresponds to the other party in the transaction. Transactions without proper names are often clerical errors, but can be used to cover up fraud.
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Remediation: Update the name field of the transaction with the appropriate payee name to remedy the issue.

Credits to Expense

Description: Credits that are booked to expense account types. A large volume of credits booked to expense accounts can signal incorrectly booked revenue, or excessive Vendor refunds linked to fraudulent purchasing schemes or control breakdowns.
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Remediation: Review the credit to ensure it is booked to the appropriate account and has sufficient supporting documentation.

Coded to Parent Account

Description: When an account in the chart of accounts has children (subsidiary) accounts, but the parent account has transactions coded to it.
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Remediation: Code the transaction to a child account if present, or create one that properly describes the category of expense needed.

Debits to Income

Description: Debits that are booked to income account types. A large volume of debits booked to income accounts can signal incorrectly booked expenses, or excessive refund activity linked to fraudulent Customer schemes or control breakdowns.
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Remediation: Review the debit to ensure it is booked to the appropriate account and has sufficient supporting documentation.

Duplicate Bills

Description: Bill transaction types where the Vendor name and Bill transaction number are the same as other Bills. All transactions should have unique identifying transaction numbers. Duplication is often a clerical error, but can signal more serious issues.
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Remediation: Review the duplicate Bills and supporting documents to assess which one(s) may need to be updated or voided.

Duplicate Expenses

Description: Expense transaction types where the Vendor name, transaction number, transaction date, and transaction amount are the same as other Expenses. Duplication is often a clerical error, but can signal more serious issues.
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Remediation: Expense transaction types where the Vendor name, transaction number, transaction date, and transaction amount are the same as other Expenses. Duplication is often a clerical error, but can signal more serious issues.

Expenses to Vendors with Bills

Description: Expense transaction types associated with vendors with amounts in Accounts Payable. Vendor payments should be applied directly to their Bills instead of booked directly to an expense account. This pattern can signify overstated expenses, overstated Accounts Payable balances, incorrectly applied Vendor payments, or potentially fraudulent activity.
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Remediation: If the Expense was supposed to be a payment for a Bill that already exists in Accounts Payable, create a Vendor Credit for the same date as the Expense and book it to the account where the original Expense was booked. If the Expense was for a Bill that has not been entered, enter the Bill as normal, then create a Vendor Credit for the same date as the Expense and book it to the account where the original Expense was booked. In either instance, attach supporting documentation on each transaction that references the other linked transactions.

Inconsistent Customer Coding

Description: Transaction tagged to a Customer where the account selected is inconsistent with where other transactions to this Customer are booked. This can often be a sign of a clerical error.
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Remediation: Review the transactions for this Customer to ensure they are booked to the correct accounts.

Missing Checks

Description: Gaps in the sequence of numbers for Check transaction types. This happens most often when someone deletes a Check that should have been voided. However, sometimes it is related to Checks that have been issued but not yet cashed by the recipient, which leads to understated expenses and overstated cash. In more serious cases, it can be used to cover up internal fraud.
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Remediation: Review the physical check stock to see if the check number in question is still in your possession. If you find a physical check is missing, ask the members of the team who have access to the checks if they know how or why this happened. Then consider calling the bank to put a stop payment on that specific check number. If you find that the check was issued, but not recorded, create a Check transaction type to record the transaction in the ledger with the appropriate information. If the physical Check was voided or destroyed, create a Check transaction type with that number in the ledger, then void it out so the sequence is preserved.

Non-numeric Checks

Description: Check transaction types with alphabetical or special characters in the number. Checks issued from banks should only ever use the numerical transaction identifiers that are printed on the physical check stock. Using alphabetical or special characters usually signifies that the transaction was entered incorrectly as a Check transaction type when it should have been another transaction type, or that the issuer made a clerical error when recording the number.
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Remediation: If the check numbering issue was due to clerical error, update the ledger with the correct number. If you find that it was entered incorrectly as a Check transaction type instead of another more appropriate type (like an Expense for example), void the Check transaction and recreate the transaction as the correct transaction type.

Undeposited Funds

Description: Funds that have been recorded as collected, but not deposited to a bank account. This can occur when a large cash balance or volume of checks accumulates at a location or when the payment application process is not being performed regularly.
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Remediation: Deposit collected funds into a bank account and then relieve the Undeposited Funds account for those amounts. Outstanding amounts should be tracked down and reconciled regularly to prevent application errors before they accumulate.

Uncategorized Expenses

Description: Transactions booked to the "Uncategorized Expense", "Ask My Accountant", "Not Specified", or "Reconciliation Discrepancies" accounts. Transactions should be booked to descriptively named accounts and not left in suspense accounts. Amounts left in these accounts can signal poor internal communication and lack of attention to detail.
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Remediation: Find the team member responsible for booking the transaction to this account, and ask them why it is there. Once the necessary level of information is provided, move the transaction to the correct account.

Unreconciled Bank Transactions

Description: All unreconciled bank transactions. These transactions should be inspected to identify whether they were incorrectly added to the bank account or if the account needs to be reconciled more frequently. If a transaction appears to have been unreconciled for a significant amount of time, it could be a duplicate, booked to the wrong bank account, or related to an issued check that was never cashed.
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Remediation: Start by reconciling the bank account through the most recently closed period. Then, ensure that the transaction is booked to the correct bank account by reviewing the bank statements or other supporting documentation. Next, void the transaction if it is determined to be a duplicate. If it was related to payment that was lost in transit, void the initial payment in the ledger and bank, then reissue it to the other party.

Updated System Admin Transactions

Description: Transactions originally created by "System Administration" and "Online Banking Administration" that have since been updated by other users. Users should generally not have to update transactions created by these account types. Inspect these transactions for any suspicious signs that dates, amounts, or payees were updated after the fact.
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Remediation: Review the transactions that were flagged to ensure the changes were correct and necessary.