Arkansas Real Estate Practice Exam

What is an audit trail?

1. A path left by a surveyor

2. A hiking trail used for auditors' retreats

3. A documented history of a financial transaction traceable to its source

4. The process of reviewing and verifying a company's financial statements

The correct answer is: A documented history of a financial transaction traceable to its source

An audit trail is a documented record of financial transactions that provides a clear and traceable path from its origin to the current state. While options A and B may involve the concept of a "trail," they are not relevant to the context of financial transactions. Option D may seem similar to an audit trail, but it specifically relates to the process of reviewing a company's financial statements and does not capture the idea of a documented history. Therefore, option C is the correct answer as it accurately reflects the definition of an audit trail.