Audit Trail
A sequential record of financial transactions and system events used to verify the accuracy of accounting records.
What is Audit Trail?
An audit trail is a chronological, documented record of all financial transactions, system activities, and document modifications that allows auditors and regulators to trace the history of any entry back to its original source. In accounting, a complete audit trail links each journal entry to supporting documents such as invoices, receipts, and purchase orders. Strong audit trails are a cornerstone of internal controls and are required under the Sarbanes-Oxley Act (SOX) for U.S. public companies. They enable independent auditors to verify that financial statements fairly represent a company's actual economic activity and that no unauthorized changes have been made.
Example
When an auditor reviews a revenue entry at a public company, the audit trail shows the original sales order, the delivery confirmation, the customer invoice, and the bank deposit—all linked to the journal entry in the general ledger. Any gap in the trail raises a red flag under SOX Section 404.
Source: PCAOB Auditing Standard AS 2201