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Did you know that well-maintained audit trails indicate a high standard of operational oversight?
From the IT staff to top management, effective audit trails call for a company-wide dedication to excellence in compliance management.
With the shift away from manual logs to digital automation, we can obtain audit trails that are easily accessible, precise, and useful. As a result, firms are better able to dodge threats and red-flag potential hazards.
When your company needs answers, a meticulous, clearly-defined audit trail will provide the evidence to untangle the issues.
What Are Audit Trails?
Audit trails are a set of records documenting the sequence of actions over the lifespan of a specific event, process, or procedure. Simply put, an audit trail is the chronological record of a transaction from start to finish, where every step is traceable and verifiable.
These records – manual or electronic – are used by firms to support operations, back-up security, and minimize operational risk. An audit trail helps auditors or administrators ensure operational integrity and regulatory compliance.
Industries in the finance sector like brokerage firms, fund managers, and accountants rely on audit trails to provide a step-by-step view of events. Actions and outcomes can be validated because the records show every detail of a transaction, such as users, dates, and times.
Audit Trails in Action
Organizations use audit trails for many different purposes. One company will use it for budget projections into the future, another for reconciliation. If a firm is initiating an investigation, the audit trail becomes a “baseline” for an audit. Businesses also use audit trails for historical information, risk management, and compliance.
For example, in accounting, audit trails can verify transactions that compute a firm’s revenue, net earnings, or earnings per share. The final figures – and their elements – can be double-checked in the log to confirm the closing numbers.
Mortgage lenders will use an audit trail to confirm the origin of down payment funds. They may want the bank statement showing where funds were deposited in the account and ask for further proof of the monies’ source.
Follow the Trail for Answers
As all audit trails record basic information, auditors and regulators can trace the whole path of events to their origin. This may comprise administrator actions, attempted logins, data access, user actions, or automatic system events.
Organizations define the elements contained in their audit records to answer these questions:
- What was the event?
- What application, system, or user-initiated the event (may include IP address/device type in the data)
- When did the event occur? (date and time)
Some audit trails go beyond and catalog actions on a deeper level than a simple system or application setup. It isn’t uncommon for IT departments to use several audit trails defined by a system, an application, or an event.
Logs like these can pinpoint specific elements such as hard-to-spot changes to a database or the information contained in it. Dodgy email usage, dubious web-browsing, and other abnormal activity will trigger an investigation.
Reviewing and Maintaining Logs
Upkeep of audit trails can be a problem for organizations; logs take up a lot of storage space that a firm may not have available. However, it is recommended that an audit trail is kept for the record’s life.
Best practices dictate that an audit log is subject to periodic review, although every firm will have different review plans. Specific regulations may prescribe a period in which a firm must conduct an audit trail review.
Who Uses Audit Trails?
Most industries need to support operations, security, and compliance. Audit records defend a company against data breaches, internal and external security threats, and support compliance reportage. As such, they form an essential part of a sound operational risk strategy.
IT department personnel – like the network administrator or security manager – will usually manage a company’s audit trails. But any user, such as a manager, employee, accountant, or someone else who interferes with an electronic record, will be trackable in that log. This could be a person who accesses the record or a system automatically changing or updating the log, such as when a computer is restarted.
Multiple Benefits of Audit Logs
The ability to track records back to their origin delivers multiple benefits such as:
- Transparency of operations
- Verifies records for compliance
- Ensures accuracy and record integrity
- Protects system from exploitation or misuse
- Secures sensitive or vital information
Audit trails provide four areas that unlock these key benefits.
The first is user accountability. By using audit trails, everyone with access to the system is encouraged to apply correct user behavior. Each user knows their actions are linked to their identity and automatically recorded. This reality prevents abuse of information, unauthorized modifications, or system misuse.
Should an investigation become necessary, events can be recreated step-by-step. What happened, and when, and how was it done are all answered by the audit trail. Having a clear view of this information helps identify and prevent future incidents of data corruption, hacking, system failures, and security breaches.
Audit logs help pinpoint system breaches. With clear regulations governing information security and confidentiality, controlling unauthorized access is paramount. Personnel information, company data, and financial records are also protected.
A solid operational risk strategy relies on well-maintained logs. Up-to-date monitoring of your automated audit trails will pick up issues such as system faults, operator errors, dubious activity, or other operational problems.
Audit Trails and Compliance
Maintaining regulatory compliance means staying up-to-date with the federal and state laws that regulate the way companies conduct their business.
When an organization fulfills regulatory compliance standards, it will keep all records and related data so that it can be promptly recalled at any time.
Most businesses use their IT department to maintain electronic records for control of record keeping. This way maintains appropriate and safe user access and tracks privacy controls. Unsurprisingly, sound audit trail procedures are most needed by the financial sector, health care, universities, and e-commerce.
For financial organizations, the old way of manual archiving is obsolete. Today, critical documentation is tracked through workflow management systems or everyday desktop utilities.
It’s easier to create audit trails in a workflow management system. A process-driven environment allows you to simplify reporting and perform checks.
Whether your audit trails support day-to-day system operations or aid compliance, they also act as a type of insurance. In the event of technical problems or a suspected breach, a well-maintained audit trail will provide the answers.
OpsCheck is the SAAS workflow management system designed by finance professionals for operational excellence. See how well our system works for you with our no-risk, 60-day free trial.
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