Definition of Audit trail:
Paper or electronic trail that gives a step by step documented history of a transaction. It enables an examiner to trace the financial data from general ledger to the source document (invoice, receipt, voucher, etc.). The presence of a reliable and easy to follow audit trail is an indicator of good internal controls instituted by a firm, and forms the basis of objectivity.
A system that traces the detailed transactions relating to any item in an accounting record.
An audit trail is a step-by-step record by which accounting or trade data can be traced to its source. Audit trails are used to verify and track many types of transactions including accounting transactions and trades in brokerage accounts. An audit trail is most often utilized when the accuracy of an item needs to be verified. Audit trails can be useful tools when determining the validity of an accounting entry, source of funds or trade.
Audit trails can be used in accounting when an examiner needs to verify figures such as revenue, net earnings or earnings per share. Transactions that are involved in computing a company's revenue, net earnings or earnings per share are reviewed and the calculations may be redone if figures were incorrectly classified. For example, cost of goods sold is an expense subtracted from gross revenue in computing net earnings. The cost of goods sold figure would be double-checked by verifying the transactions and data sources that went into calculating cost of goods sold. All elements of the final numbers are double-checked along the audit trail to verify the final figure. All public companies undergo a financial audit as part of their reporting responsibilities.
How to use Audit trail in a sentence?
- I had to keep an eye on the audit trail because it would inform me about the whole process of the transaction.
- With no satisfactory audit trail, not all overpayments had been identified.
- Saving reciepts on large appliance purchases will help your accountant prepare your taxes and will provide an audit trail for the IRS if there should be any questions on your tax return.
- You should be able to follow the audit trail to figure out how things have gone and where they may go.
Meaning of Audit trail & Audit trail Definition