How does the system determine what type of transactions require approval?

The system determines the types of transactions that require approval primarily through Approval Policies. Approval Policies are the settings that define specific criteria under which transactions must undergo an approval process. This allows organizations to control and ensure compliance on financial transactions based on various factors, such as the amount, type of transaction, departments involved, or even custom-defined rules that the organization may implement.

For example, an organization might have a policy that any invoice over a certain dollar amount requires approval from a specific manager, or that any purchase order needs to be approved by a finance person first. These policies help maintain oversight and accountability in financial transactions.

The other options, while related to the overall transaction process, do not specifically set the criteria for approval. Transaction Types categorize the nature of the transactions; Vendor Settings pertain to vendor-related configurations, and Audit Trails capture records of changes and actions taken within the system without defining approval requirements.