What It Is:
An audit trail refers to the complete record of events that occurred in the execution of a transaction.
How It Works/Example:
When a transaction is executed (e.g. a business purchase), each documented step taken makes up the audit trail. Depending on the transaction, the audit trail can be highly complex or very simple.
For instance, the audit trail for the purchase of a carton of milk would consist only of the receipt for the transaction. This receipt details the exchange of cash for the item purchased (milk), the date, and the institution where it occurred (the store).
Why It Matters:
The records comprised in an audit trail can be reviewed with diligence in the event that accounting figures fail to reconcile. Recreating a transaction step-by-step will reveal where a breakdown in the process occurred (if any).