I was performing an operational audit at a location recently, and I asked the head of the company’s audit function how many canceled transactions he typically sees per shift at this property. His response was “not very many”, and when I asked him to quantify the estimate he said 5 or 6 per shift. While I didn’t allow my jaw to drop to the floor, I clearly was surprised by this number and even more by how differently two people can define not very many. I have always held a threshold of 2 canceled transactions per shift as being in a normal range, and when I see more than that I almost always find an issue at the location.
When a canceled transaction occurs, it’s commonly because a mistake was made or a customer is disputing the fee calculation. Mistakes can range from overlooking a validation or exception that needed to be keyed into the fee computer to incorrect entry of the entrance time for fee calculation purposes. Canceled transactions are an area of major concern; they can be used to manipulate the system for things like ticket substitutions or fraudulent exceptions and validations.
Every canceled transaction should be reviewed by a manager or auditor to verify its legitimacy, but the volume of these transactions can be an indicator of potential manipulation taking place at the location.
Cashiers who are new to the location are likely to make more errors as they become familiar with the job and use of the fee computer. During the first 2 to 4 weeks at a location, it is normal to see a higher number of canceled transactions, but the number should start to go down from that point forward.
Equipment is Old and/or Unreliable
Older equipment and/or systems that are unstable can require cashiers to clear more transactions if fees are calculated by the system incorrectly, tickets aren’t read properly, etc. In these cases, canceled transactions are probably not the only area of concern, and a comprehensive review of the loopholes created by the equipment challenges and audit responses to each are in order.
There are a lot of Validation Programs, Exceptions or a Complex Fee Structure
Hospitals and shopping malls come to mind here. Obviously, the more complex the operation is the greater the opportunity for errors to be made. At these locations, it’s a good idea to determine what the acceptable range is and monitor all employees against this standard in addition to reviewing the actual canceled transaction activity.
I stand by my opinion that 2 canceled transactions are in the normal range, but it’s also a good idea to take unique location factors into consideration when determining thresholds for this activity.