Final answer:
The purpose of an audit trail is to document and verify the integrity of a transaction from its initial input to its representation in the financial statements, by following its chronological processing.
Step-by-step explanation:
The purpose of an audit trail is to chronologically document the sequence of events related to a particular transaction. This allows for a comprehensive review which ensures that the transaction is appropriately recorded and processed, and that it accurately reflects in the financial statements. When analyzing an audit trail, you should carefully consider the timeline of events, discerning what happens first, what happens next, and understanding the cause-and-effect relationship among the various steps involved in the transaction's life cycle.
An audit trail typically begins with the initial input of the transaction data and follows through with each step of processing until the final outcome is reflected in the financial statements. This thorough examination assists auditors in verifying the integrity and accuracy of financial reporting. It is not primarily to examine a problem and explain possible solutions, nor is it to recommend a specific solution, but rather it is to trace and ensure the trustworthiness of financial information from start to finish.