What is an Audit Trail?

Definition: A series of paper, electronic files, and other such records that show how transactions are dealt with by an organization from beginning to end. An auditor examines the audit trail during the audit of a company,

Audit trails can be paper or electronically based, and they provide a complete documented history of a transaction that occurs in an organization. It provides auditors a way to trace transaction's financial data from the general ledger all the way to the orgininal document (an invoice, voucher, or otherwise).

A reliable and clear audit trail indicates that a firm has superior internal controls and also forms the basis of objectivity in an audit.

Audit trail: the process

An audit trail includes a chronological account of steps that were completed in order to bring a transaction from order to completion.

This trail can be easy to follow or it can be incredibly complex – depending on the amount of steps that are necessary with the transaction. Following an audit trail for an invoice issued by a vendor, for example, would likely be a relatively simple process.

Often, an audit trail starts at the receipt of the invoice, and then follows it through Accounts payable, and at last ends with the check or electronic payment that was issued.

Audit trails may include more steps and be hard to follow however. This depends entirely on the company and the transaction.

Audit trails: management tools

Audit trails can be used as efficient tools for managing a company’s finances and other resources.

They are a good way to find out if a comapany's transactions are being conducted seamlessly and honestly, while also remaining as short and efficient as possible.