Learn what audit trails are, their importance for business compliance and security, and how Summit's solutions can streamline your financial processes.
Audit trails can benefit your business in many ways. They can strengthen your internal processes and expense tracking while safeguarding your financial data and reducing errors, fraud, and unauthorised user activities. They can even impact your workplace culture.
In addition to these internal benefits, your company will benefit from audit trails, which can help avoid fraud or audit investigations and increase investment opportunities.
In this article, we'll explore what audit trails are, the various types of audit trails and their specific characteristics, and their importance for your company.
What Is an Audit Trail?
Audit trails, or audit logs, are chronological records that detail the entire history of a purchase. They account for every project detail, user activity, and transaction in a purchase. Audit trails are often used in finance and software to analyse and report on managerial and operational processes. An audit trail can trace every step of the purchasing process.
The efficacy of an audit trail depends on how comprehensive a company's record-keeping is. A well-organised company that pays for a product should detail several documents in their audit log. These include the request for the order form, the purchase order form, the invoice, the receipt, transaction details, and any comments made during the purchase.
The Purpose and Importance of Audit Trails
Audit trails are often mandatory for many compliance activities and are treated as best practices when they aren't mandated. They are essential for maintaining accountability and transparency in financial and operations processes, ensuring compliance with regulations and enhancing security.
Internal controls are a business's data and information security, IT, cybersecurity, financial controls, computer systems, software, and business process controls. They act as record-keepers to reduce fraud and human error and enhance international controls and data security.
Businesses that maintain airtight audit trails can more easily identify internal fraud by tracking different users' actions concerning company data and information. They can also help identify outside data breaches, flagging malware and ransomware crimes. Identifying outside data breaches will improve a company's information security capabilities.
Audit trails also assist companies in complying with audits from independent external auditors. By keeping a detailed record of every stage of a financial transaction, they reveal its key details for potential reviews. Internal investigations also become more manageable with an automated audit trail.
Types of Audit Trails
Several types of audit trails assist in spend management and expense tracking. Nearly all industries use a form of audit trail to establish compliance and improve information security. Any business handling sensitive information, including financial and accounting, manufacturing and product design, IT tracking and data, eCommerce sales records, and clinical research data, must use audit trails.
External audits are usually performed by CPA (Certified Public Accountant) firms that businesses hire to inspect their finances. The final external audit report will include the CPA's opinion of the company's financial standing.
Internal audits include compliance, financial, information technology, and operational audits. Employees in different company departments can be cross-trained in objectively auditing different departments. This training can ensure that managerial tasks, processes, and protocols are completed correctly.
Governments often mandate healthcare companies adhere to strict security and privacy measures to protect health information. The USA, for example, has the Health Insurance Portability and Accountability Act of 1996. It sets privacy standards for protecting patient health information, outlaws disclosure without patient knowledge, and dictates when and how it can be disclosed. Audit trails are needed to track who has access to a patient's medical information and who has appropriately accessed it.
Any companies working in the financial sectors are subject to regulatory requirements that necessitate secure audit logs. Examples of audit trails seen in a financial business include:
- Ledger Entries: Documents entered into financial ledgers, including adjustments and reconciliations.
- Transaction Logs: These track all financial transactions, including sales, payments, purchases, and receipts.
- Audit Logs: Provides a record of external and internal audit activities. Any findings and actions taken in response are logged.
Audit logs display the professionalism of a company that prioritises compliance and control. They are critical to the success of finance companies and are subject to regular regulatory audits and outside reviews.
How Summit Can Help with Audit Trails
Summit's Employee Expense Management simplifies audit trails for your finance teams by eliminating manual entry and tool switching. For simple claim submissions, employees can access AI-powered smart scanning with their mobile apps.
Summit's expense management system includes built-in policy enforcement, so you won't have to worry about fraud and mistakes when conducting an audit trail. Employee spending will comply with company policies, industry standards, and government regulations, minimising the risk of non-compliance and fraud. Your expense policy is automatically enforced, taking the stress out of expense management.
If you want to try Summit's Employee Expense Management, contact us to talk to one of our representatives to schedule a free demo. Our friendly team members will be willing to address any questions you have about our products.
