Audit trails in accounting differ from audit trails concerning IT infrastructure. Audit trails are usually used interchangeably with audit logs in software control. But then, what exactly do we mean?
The term “audit” is well known to many as thorough investigations of fraud or suspicious activity in an organization. The broad understanding of auditing is a verification procedure conducted by an auditor involving paperwork documentation, data review, and analysis.
Today businesses are digitalizing all their operations. Hence, auditing is no longer dependent on paperwork. Instead, electronic auditing is in place.
That is where the audit trails come in.
What is Audit Trail?
It implies investigation of finances and tracing back to expenditures for verification by auditors and internal finance officers.
In software, it refers to a chronological record of each activity or event that happens to data. It captures everything that pertains to data, such as the addition of information, deletion, modification, or a sequence of automated system activities.
An audit log system identifies who is responsible for those activities, when, and how they were undertaken. Every organization gets varied volumes of audit logs daily.
Large businesses can have multitudes of audit logs that make tracking complex. Hence, automation of audit trails and regular reviews becomes mandatory.
How does an Audit Log Operate?
An audit log can be an automatic or manual record.
An automatic record has automated logs, unlike a manual record that needs you to input the logs. The operations depend on the nature of your IT infrastructure. It varies as per your operating systems, applications, and devices.
Audit trails record every activity that occurs within your system. It takes details of who, when, and how the activity occurred. It also shows the response of your system to the activities that took place.
You can have several audit trails and assign them to different systems. You can tailor your audit trails to take more details of either a system, application, or event.
Who needs Audit Trails?
Audit trails of records include all individuals in a company who gets access to the electronic data. Any system that automates any changes in the computer is also part of the records. Anyone in need of accurate data records for audits or any other reason can use audit trails.
Nearly all companies, including industries and government organizations with regular internal and external audits, need to use accurate audit trail systems.
Companies benefit from data logs either in tracking transactions or IT records. Also, industries such as healthcare, finance, manufacturing, education, and agriculture rely on audit trails.
Some of the uses of audit trails include financial and accounting records, budget planning, IT helpdesk records, student records, and tax compliance.
That said, it is needful for every industry to have a well-defined and accurate trail system for maximum operation.
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What are the components of an audit trail?
Its components include information that allows backtracking of every activity to the source. Such information can include login attempts, user activities, administrative tasks, and automated system activities. Typically, the components include the following information:
i. user identification that can include IP addresses and other identifying details,
ii. timestamp (time and date of activity occurrence), and
iii. summary of activities indicating events or changes by a specific user
The components for financial audits include information related to source records, details of completed transactions, and transaction identifiers.
When is an audit trail used?
It is mainly used when there is a need to verify transactions’ accuracy in an organization. It can also be utilized to validate accounting entries and sources of funds. In software controls, it is used to prevent unauthorized access to an organization’s sensitive data or when there’s a risk of breaching data.
Importance of a well-functioning audit trail system
Audit trails are useful in many (if not all) sectors. Hence, every business should have some auditing system. We cannot emphasize the importance of audit trail enough. It ranges from law compliance to tracking transactions to enhancing information integrity and availing audit records. The primary need for audit logs or audit trails is to provide a standing ground for audits by providing reliable records when there is a need for investigation in an organization. Let’s get into the details of the importance of a well-functioning trail system.
Enables compliance to the law
It is a requirement for most industries to comply with regulatory statutes by keeping electronic records. The law can also mandate organizations to have a proper audit system for adequate storage of electronic information. Data trails will be crucial in providing evidence for industry compliance during an audit.
Gives details of individuals accessing the company’s data
An audit log system records the details of who gains entry to the company’s databases and files. It also details why someone is accessing the data and the time of access. This allows the management to have control of what and when to share specific types of information.
Retrieval of lost files
A company can always access the old version of data whenever a file gets lost. A well-functioning system allows the identification of errors that result from system malfunctioning or due to other causes.
Detection of unauthorized access and system malfunctioning
The available details from audit logs provide an easy way of determining unauthorized access. You can analyze the logs’ components to detect data breaching or any fraudulent act. A fully operational audit log system also allows you to predict a system malfunction to allow quick corrective measures.
An organization can retrieve data in the audit logs to investigate a crime. The organization will direct all the recordings in the system to the source to pinpoint the causes of errors and criminal activities.
Best Practices in Performing Audit Trails
Optimize Database Performance
Organizations keep track of large amounts of data stored in their databases. The collected data is useful when an organization can retrieve and use the data to its advantage. Companies should link their database to audit log software. The linking will help the company to maximize the importance of audit trail. The connected software needs to be highly-operational to predict any system malfunctions to allow quick corrective actions. An organization can also do database optimization by boosting database visibility and automating major database administration processes.
Analyze the Organization’s Data
Data analysis gives an in-depth understanding of the collected information. The analysis allows an organization to detect fraudulent activities and other security concerns. That way, the management can devise appropriate methods to reinforce data security measures. Besides, data analysis allows organizations to improve performance by ensuring smooth operations in their systems.
Protect Organization’s Network
An organization needs to protect its network from external attackers. You can ensure network protection by integrating security software into your system. An organization should integrate an exceptional security tool to detect and prevent security threats.
Benefits of Having a Functioning Audit Trail System
1. Promotes user accountability
A functioning system records the activities of every user. This promotes appropriate user behavior because everyone is held accountable for their doings. Appropriate user behavior prevents malicious acts such as the introduction of computer viruses and unauthorized database alterations.
2. Promotes Organization’s Data Security
Data security is a top concern for every organization. Sensitive data, including personal details, financial statements, and intellectual property, necessitates data security. A company should utilize an effective system to protect its data from unauthorized access and fraudulent activities by staff and external parties. The system can also detect malfunctions that can lead to data loss.
3. Allows reconstruction of events
An excellent audit log system allows organizations to understand the operations of users, including cyber attackers. The information retrieved can be used by organizations to devise ways of strengthening their systems to avoid future threats such as hacking and system failures.
4. Detection of System Interference and Errors
A functioning audit trails system indicates upcoming system interference, failures, and errors. Such detections allow an organization to respond accordingly to allow a smooth continuation of its operations.
5. Identification of intruders
An organization’s database needs to be accessible to only authorized parties. Getting a functioning audit log system allows an organization to detect intrusion by any outsider. Intruder identifications is a regulation by most states to avoid unauthorized access to personal information and promote confidentiality.
The success of any organization lies in maintaining data security to promote data safety and confidentiality. In most organizations, it is the responsibility of IT users and management to ensure data integrity and safety.
However, ensuring data security across departments in an organization can be complicated and cumbersome. That is why audit trails by Teamstack should be your priority to enhance your data security.
Teamstack offers a well-functioning audit trail that is highly effective for organizations. The Teamstack’s audit log feature secures data for every employee in your organization. It informs you of all the login attempts and requested credentials across your systems.
It also allows you to detect any malicious acts, whether by internal or external users. The audit information will include IP addresses and the location of the users. This presents an opportunity for top-notch data security in your organization.