Definition
An audit trail is a chronological record showing who created, changed, sent, or deleted each financial document or transaction, and when. For invoicing, it covers edits, status changes, payments recorded, and emails sent. A complete audit trail helps resolve disputes and lets accountants and tax auditors verify that records are accurate.
Also called: Activity log, Audit log, Paper trail
Audit trail in practice
Tax authorities in many countries expect businesses to keep invoices and the records behind them for several years, and some require proof that issued invoices were not altered. Software that logs every change, and that voids rather than deletes invoices, makes this much easier to demonstrate.
Frequently Asked Questions
Why should I never delete an issued invoice?
Deleting breaks your numbering sequence and the audit trail, which can raise questions in a tax audit. Void the invoice or issue a credit note instead, so the history stays visible.
How long should I keep invoice records and their audit trail?
Commonly between 3 and 10 years, depending on the country and the type of record. In the US the IRS generally expects at least 3 years, and longer in some cases, so check local rules or ask your accountant.
Related terms
- Void invoice A void invoice is an invoice that has been cancelled so it no longer counts as a request for payment or as revenue.
- Journal entry A journal entry is a record of a single financial transaction in a business's books, listing the date, the accounts affected, the debit and credit amounts, and a short description.
- Invoice number An invoice number is a unique identifier assigned to each invoice so it can be tracked, referenced in payments, and audited.
- Reconciliation Reconciliation is the process of matching payments received in your bank account to the invoices they settle, and confirming that your invoicing records agree with your bank records.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.