I had a lady ask for a refund, and I could not find the order in Paypal. I called paypal and they said her credit card was declined, but it went through as a sale on our site.
We are running Magento 1.7.0.2. I would have filled the order and never thought twice about the order, except she asked for a refund.
Is there a bug in Magento that it marked this as a completed sale?
You'll need to turn on debugging/logging for PayPal. There is a setting under the many numerous PayPal sections in the admin under System > Config > Payment methods. Find the appropriate PayPal setting and turn debugging on so you can watch for future events/problems. Unforunately anything which is previously sent is going to be very hard to diagnose as there is no logging turned on.
Am I looking for "debug mode"? I see that it is turned on already. I don't see another option that seems related to expanded logging.