What describes an Audit Trail?

• A. A record of all inventory movements.
• B. A procedure for approving payments.
• C. A path that allows a transaction to be traced through a data processing system from point of origin to output or backward from output to point of origin.
• D. A summary of monthly expenses.

Answer: (C)

An audit trail is a pathway that lets you trace a transaction through a data processing system from its origin to its final output, or in reverse from output back to origin. It records the steps the data takes, who handled it, when each action occurred, and what data changed, so you can reconstruct exactly how a transaction was created, modified, and approved. This traceability supports data integrity, accountability, and regulatory compliance, and is crucial for investigating discrepancies or breaches.

For example, in processing a payment, the audit trail would show who initiated it, when it was reviewed, who approved it, what data was used, and where it entered the accounting system, enabling a full end-to-end reconstruction of the transaction’s journey.

The other options describe related concepts but not the continuous, system-wide traceability that an audit trail provides: tracking inventory movements is about physical stock changes, a payment approval procedure is about internal control processes, and a monthly expense summary is a financial report rather than a detailed log of data flow.