What is an Audit Trail?

Audit trails are documented processes through which financial, transactional, trade and/or accounting information is systematically traced back to origins. Audit trails are useful to validate information for accuracy. During compliance audits, audit trails are an important tool for identifying areas of non-compliance and/or fraud. Audit trails can also be used to identify erroneous assumptions made during complex computations.

Let’s look at what an audit trail is….

How intensive is an audit trial?

Audit trails can have different levels of intensity depending on what they are being used for. During a Customs audit, the authorities may simply be trying to determine whether the amount of funds remitted to an overseas supply matches the amount actually declared on an import declaration. This would be a relatively low level audit. In another instance, the income tax department may be conducting an audit on a company’s finances to reconcile with annual reported earnings. This would be a more of an intense audit. Audit trails can also be followed to determine whether values declared to Customs are correct on import and export declarations, this would be more of a mid level intensity type audit.

In supply chain audits, documents such as Bills of Lading, invoices, and related payment records will need to be scrutinized.

What is the purpose of audit trails?

In addition to the uses of audit trails covered above, they can be used in many other ways such as:
  • To detect insider trading or to detect other non compliant market activity
  • To support forensic auditing of white-collar crimes
  • To support investigations into criminal activity
  • To validate claims made against debtors

A final note

Audit trails can include hard copy documents and/or electronic records. In large and complex audits, a combination of the 2 may be required. In many cases, it may be necessary to engage professionals to conduct an audit. Professionals can be expected to have high quality processes when conducting audit trails.

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