Audit Trail Feature in the Accounting Software Mandatory for Companies | Management / Auditors Responsibilities on Mandatory Audit Trail Discussed by CA. (IP) Vivek Khurana.
MCA Notification on Audit Trail:-
According to Ministry of Company Affairs (MCA) notification dated March 24, 2021 (Companies (Accounts) Amendment Rules, 2021), for the financial year beginning on or after April 1, 2021,
Every company that uses accounting software to maintain its books of account shall use only Accounting Software that has a feature of recording an -
Audit Trail of each and every transaction,
Creating an edit log of each change made in books of account along with the date when such changes were made.
Ensuring that the audit trail cannot be disabled.
The MCA has later announced that the above amendments will take effect on April 1, 2023, which suggests that accounting software used by businesses will have to comply with the Accounts Rules beginning in the financial year 2023-24.
Audit Trail?
An audit trail is a sequence of recorded computer events that involves any activity around the operating system, applications or user actions. One computer can have several audit trails that each serve a different purpose.
An audit trail is a sequential record detailing the history and events related to a specific transaction or ledger entry.
Audit Trail Responsibility:-
Proviso to Rule 3(1) of Companies (Accounts) Rules, 2014
(Management Responsibility)
Rule 11(g) of Companies (Audit and Auditors) Rules, 2014
(Auditor’s Responsibility)
Rule 3(1) of Companies (Accounts) Rules:-
Proviso to Rule 3(1) of Companies (Accounts) Rules, 2014
Provided that for the financial year commencing on or after the 1st day of April 2023,
Every Company which uses accounting software for maintaining its books of account,
shall use only such accounting software which has a feature of recording audit trail of each and every transaction,
creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
Management’s Responsibility in Audit Trail:-
Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014
The management has a responsibility for effective implementation of the requirements prescribed by account rules i.e., every company which uses an accounting software for maintaining its books of account, should use only such accounting software which has the following features:
Auditor’s Responsibility - Companies (Audit & Auditors) Rules,2014:-
11. Other matters to be included in auditors report :-
The auditor’s report shall also include their views and comments on the following matters, namely:-
(a) whether the company has disclosed the impact, if any, of pending litigations on its financial position in its financial statement;
(b) whether the company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts;
(c) whether there has been any delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.
(d) Omitted
(e) (i) (ii) (iii)
(f) Whether the dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.
(g) of Companies (Audit and Auditors) Rules, 2014.
Whether the company, in respect of financial years commencing on or after the 1st April, 2022, has used such accounting software for maintaining its books of account which has a feature of 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 feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention
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The statements and opinions expressed in video are those of the speaker and do not necessarily reflect those of the CA Sansaar or any of its employees. CASansaar Team does not take any responsibility for the views of the Speaker.
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