A paper trail (or its virtual equivalent) might be the bane of movie mobsters and would-be fraudsters, but for any company looking to provide accurate financial statements and meet their legal obligations, it’s an essential part of doing business. A thorough and transparent accounting audit trail is of particular import in record keeping, as it provides complete financial data for your business’s transactions and greatly reduces the risk of fraud.
When you have a full audit trail for every transaction, accounting audits are greatly simplified—and are no longer a cause for panic. Understanding how an audit trail works, and the ways in which you can streamline and simplify the process, will make it easy for your accounting staff, and your company as a whole, to navigate financial record keeping and reporting.
What is an Accounting Audit Trail?
Picture a long hall, lined with every scrap of information related to the history of a transaction. Walking down this corridor gives you (and auditors) full access to everything there is to know about the transaction, and every step it took along the way as it travelled through your company.
Items along the trail include, but aren’t limited to:
- Vendor invoices
- Purchase orders
- Bills of lading/Shipping documents
- Bank statements
- Electronic payments
- Customer invoices
- Entries in the general ledger
- Emails, IMs, and other related communication between staff, vendors, and management
Whether you’re part of a non-profit, a small business using a mix of paper and electronic records, or a paperless megacorporation with thousands of daily transactions, the audit trail system should be a cornerstone of your record keeping. If it’s in your organisation’s accounting system—or a related source document—it should appear on this trail.
“Having an accounting audit trail for every transaction combats errors in financial reporting by reducing the risks that come with both missing (or incomplete) data and fraud. Full transparency makes it easy for auditors to confirm your information is accurate and complete, and aid your own team in identifying areas for potential process improvement.”
Why Audit Trails Matter
Having an accounting audit trail for every particular transaction combats errors in financial reporting by reducing the risks that come with both missing (or incomplete) data and fraud. Full transparency reduces “red flags” and makes it easy for auditors to confirm your information is accurate and complete, and aid your own team in identifying areas for potential process improvement.
Demonstrating compliance—both legal and financial—is greatly simplified by a clear audit trail. In addition, since audit fees are generally billed by both time and task, making things as easy for the auditors as possible will save your company money during an actual audit.
Audit Trail Essentials
An effective audit trail is built on three pillars of performance and productivity:
- Rock-Solid Internal Controls. A carefully crafted blend of procedures, policies, and workflows, internal controls are designed to improve compliance, ensure accuracy in financial statements, and reduce risk.When they are clearly written, provide reasonable contingencies for potential challenges (e.g., computer system problems, human error, process improvement opportunities), and allow for necessary adjustments as circumstances warrant, internal controls can make every aspect of procurement, compliance, and financial reporting, including audit logs, much simpler.
- Staff Engagement. From senior management down, it’s essential to ensure every member of your team:
- Understands the importance of following internal controls
- Has the necessary training and access to approved software and other tools
- Has full, unfettered access to all the information needed to request, approve, and review transaction data as needed, from day-to-day workflows to quarterly reports and annual audits
- Automation Technology. Like nearly every accounting process, your company’s audit trails are infinitely easier to manage with the aid of a centralised procurement software package on your computer system. Alone or in tandem with your Enterprise Resource Planning (ERP) and productivity software, reliable procurement software connects your entire team and tracks every step of the procure-to-pay process while providing rich data for forecasting, reporting, and yes, faster, clearer audits.You can create customised, automated workflows, and build strong internal controls to manage requests, approvals, and budgets, while gaining instant, searchable access to every source document, financial records, and related communication. Human error, invisible spend, and fraud disappear, while you gain access to new insights on your spend and total financial data transparency.
Blazing An Accurate Audit Trail Can Be Easy
From fixed asset depreciation to accounts payable, every transaction your company conducts has a history—and a trail of data. Taking the time to make sure that trail is easy to access, follow, and confirm is the first step to taking the pain out of not just audits, but procurement and accounting as a whole. Bid farewell to fines, fraud, fees, and frustration by ensuring your audit trail is transparent and complete.
Say Goodbye to Stressful Audits Forever With a Fully Auditable Procure-To-PayFind Out How