The purpose of an audit trail is to provide a complete historical accounting of business transactions for future use in tracking missing records, investigating fraud and demonstrating compliance with required standards, according to the Houston Chronicle. The creation of an audit trail is a sound business practice that ensures accurate documentation of account records, facilitates reconciliation and displays proof of financial accountability.
In the case of a missing business transaction, the audit trail provides a framework of related work which, when logically reviewed, simplifies the process of isolating and locating the lost matter. Similar reviews may reveal evidence of records irregularities that indicate tampering and fraud. An audit trail also provides preventative fraud protection because employees are less likely to see any opportunity for dishonest behavior within the strict confines and scrutiny of audit compliance regulations. A well-organized audit trail creates credibility, maintains integrity and prepares a business for unexpected external audits. A business operating with well-maintained, clear records that show how money moves through various accounts is unlikely to be penalized for non-compliance.
Documents to be held as essential components of an audit trail include checks, invoices, purchase orders, and all records of employee working times, wages and tax records.