MCA has made it mandatory to conduct and retain audit trials of all transactions in their accounting software.
- The major rationale for implementing audit trail maintenance in accounting software is to promote accountability and transparency in business transactions or processes.
- MCA has issued a notification dated 24-03-2021 regarding Companies (Accounts) Amendment Rules, 2021 and Companies (Audit and Auditors) Amendment Rules, 2021, as well as a subsequent notification dated 01st April, 2023, which includes audit trail in accounting software for companies as a new sub rule to Section 128 of the Companies Act, 2013. However, it was subsequently postponed to later dates, and they are now ultimately required as of April 1, 2023.
- Companies that keep their books of accounts electronically must utilise accounting software that includes audit trails. It provides an Audit Log, which contains information about all changes made to Financial Transactions. Companies are required to compulsorily use these software’s where Audit Trial function is available & functationlity of Audit Trial is enabled.
- The Auditor is in charge of ensuring that the Company maintains Books of Accounts in Accounting Software where Audit Trial is permitted. If not, the auditor must provide their thoughts or opinions in their audit report not only during the audit but throughout the year. Auditors must also verify the legitimacy of the Audit Trial and determine whether it has been tampered with.
- According to the Companies (Audit and Auditors) Amendment Rules, 2021, and Companies (Audit and Auditors) Second Amendment Rules, 2021, which take effect on April 1, 2021, the following clause is inserted in Rule 11 of the Companies (Audit and Auditors) Rules, 2014, on which the Auditor of the Company will give their views and comments while preparing audit report.
- “Whether the company, in respect of FY Commencing on or after 1.04.2023, has used such accounting software to keep its books of account which has a capability for recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail characteristic has not been tampered with and the audit trail has been preserved by the company in accordance with the statutory requirements for record retention.”
For additional information on many topics relating to the Ministry of Corporate Affairs and the Accounting field, please contact India Financial Consultancy Corporation Pvt Ltd, a team of professionals and expert CA CS in Delhi.
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