Audit Trail in Tally Prime: why is it Important in Accounting?
Have you heard all the buzz around Audit Trail? If not, this article covers the topic vividly and will help you understand its importance in accounting.
What Is Audit Trail?
Audit Trail is a step-by-step record of all financial transactions and trade details, which can be traced to their source. It is one of the key features of Tally Prime Software that provides the entire trail of a voucher starting from when it was created, by whom, and all the names of users who altered it and when.
Also, it helps verify the accuracy of items and determine the validity of accounting entries, trade, funds, etc.
The Importance Of Audit Trail In Accounting
The audit trail makes fraud detection & prevention simple and easy. Businesses can prove the legality of a transaction while creating an audit trail and can provide relevant information.
To prove the legality of a transaction:
- Businesses must have supporting documents like approved invoices, purchase orders, and others for all business transactions.
- Bank reconciliation can also be considered a part of an audit trail if performed by someone other than the cheque writer or signer.
- As employees know that the administration is tracking and monitoring their activities daily, they will not be indulging in any fraudulent activities.
Payroll and Human Resources
Payroll and human resources are an indispensable part of any business, big or small. Therefore, the government has made it mandatory for organizations to maintain records related to employees' hiring, termination, pay, and eligibility to work at a specific location or country.
If the precise trail is not maintained, fines are levied that consume organizational resources and hinder its growth. The same also helps resolve disputes among employees.
Therefore, it is crucial for businesses to keep all time cards, payslips, and other records to minimize the potential risks of disputes, which, if not resolved, can wither the health and progress of organizations.
Local, state, and federal government entities like the IRS, State Revenue Department, and local agencies can audit a business at any time.
With the audit trail feature, businesses can keep the records well-organized so the same can provide evidence that your business runs as per the specified rules and regulations.
Loan and Investor Documents
If a business needs a loan, the bank will ask for business plans and financial statements to document the contents. So, an audit trail will provide the bank with all the documentation required for pacing up the lending process.
The trail contains all the source documents that initiate an accounting transaction, including invoices, cheques, time cards, etc. Hence, businesses must maintain an easy-to-use filing system and ensure seamless access to documents, especially in situations of urgency.
Why Should Businesses Opt For Audit Trail?
- An audit trail is a sequential record containing detailed information of all events in the past and present related to every transaction or ledger entry.
- It is a regulatory requirement for all private and public limited companies to maintain an audit trail in their accounting software.
- It provides evidence & information for regulators in illegal financial activity or suspected fraud.
- An audit trail helps stabilize the economy by verifying the information corporations release to the public.
- It helps organizations answer the questions about the validity or accuracy of trade data.
How HSB Can Help?
HBS Solutions Pvt. Ltd. is a prominent Tally Prime software provider with over 100 modules. One such module is Audit Trail, which can be used in different financial areas and helps trace the sources of accounting, trade details, or other financial data.