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What Is An Audit Trail? How Does The Audit Trail of A Manual System Different

The transaction cycles of a business depend on its operating cycle. Merchandising businesses go through expenditure, conversion, and revenue cycles, while some only go through expenditure and revenue. Manual accounting uses physical documents processed by employees, while digital accounting utilizes databases to automatically update data. The audit trail traces transactions to source documents for auditing financial statements. Manual audit trails can be difficult, while digital trails easily track connected files. Batch processing has lag between events and processing, while real-time processing occurs as events happen in real-time for faster and more efficient operations.

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ALLIAH CARL MANUELLE PASCASIO
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57 views1 page

What Is An Audit Trail? How Does The Audit Trail of A Manual System Different

The transaction cycles of a business depend on its operating cycle. Merchandising businesses go through expenditure, conversion, and revenue cycles, while some only go through expenditure and revenue. Manual accounting uses physical documents processed by employees, while digital accounting utilizes databases to automatically update data. The audit trail traces transactions to source documents for auditing financial statements. Manual audit trails can be difficult, while digital trails easily track connected files. Batch processing has lag between events and processing, while real-time processing occurs as events happen in real-time for faster and more efficient operations.

Uploaded by

ALLIAH CARL MANUELLE PASCASIO
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. How do the transaction cycles relate to the operating cycle of a business?

 The transaction cycle greatly depends on the operating cycle of a business. Businesses have their own
transaction cycle that corresponds and caters to their day to day needs. Merchandising Businesses goes
through all three cycles: (1) the expenditure cycle wherein the business purchases their raw materials, (2)
the conversion cycle wherein the raw materials are being transformed into finished goods and lastly (3)
the revenue cycle where the sales of the products to the customer takes place. On the other hand,
merchandising business which do not need to produce their own products simply go through the two
cycles of expenditure and revenue.

2. Differentiate manual accounting records from digital accounting records. 


Manual accounting records uses traditional records such as documents, journals and ledgers which are
being processed by clerks and employees without the help of an automated system. A product
document goes through the process of data collection, sales document, sales system, and billing which
produces remittance advice. There is a great amount of inefficiency in doing manual accounting records
because the data are not being updated. In digital accounting, on the other hand, utilizes the use of
data base to update the data they have automatically. The physical copies of journals and ledgers used
in the manual accounting are now stored in the database as files. Every action triggers an update to the
data in the master files which eradicates the inefficiency found in manual accounting.

3. What is an audit trail? How does the audit trail of a manual system different
from that of a computerized or digital system?
The audit trail is a way to trace transaction to its origin or the source documents to the financial
statements. It checks the path where the data came from. This trail is important in auditing the financial
statements of the company to ensure that all the data presented are backed up by credible sources.
Every account has a corresponding trail to which it is connected. The audit trail of a manual system can
be quite hard to figure out due to the physical copies of their documents, sometimes documents could
get lost or irresponsible stored in the wrong place. However, in a digital system where the data are
connected to each other and the use of data base is widespread, it is easier to track down which files
corresponds to which.

4.   Differentiate batch processing from real time processing? Which is more


beneficial to use? Briefly explain your answer.
In batch processing, there is a lag between the economic event and when it is processed by the system,
unlike in real-time wherein data are processed in the moment an event occurs. In using batch
processing, the business only needs to deploy fewer resources as compared to real-time processing. I
believe that the real-time processing is advantageous than the batch processing. Real-time processing
allows the business to have a faster and a more efficient operation flow. The moment a customer places
his order, it automatically registers in the system of the seller allowing them to complete a transaction
much longer. In real-time processing, the customers will have a fewer chance of experiencing lag time in
their orders, the faster the transaction happens, the better the profitability ratios of a company.

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