DEFINITION of 'Audit Trail'

A step-by-step record by which accounting data can be traced to their source. The SEC and NYSE will use this method for the explicit reconstruction of trades when there are questions as to the validity or accuracy of an accounting figure.

BREAKING DOWN 'Audit Trail'

This is the technique used to track improper market activity. By documenting and analyzing all houses and brokers involved in specific trades, those who follow the audit trail can (hopefully) identify the culprit.

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