Audit trail
With effect from 1st April 2023 all Companies ( including MSME Companies, small Companies and not-for-profit companies licensed under Section 8 of the Indian Companies Act 2023) must ensure that the software which they use for accounting, generating sales invoices etc has a built-in mechanism to record audit trail of every transaction, creating an edit log of each change made in the electronically maintained books of account along with the date when such changes are made and ensure that the audit trail cannot be disabled.
Once the ‘audit trail’, ‘edit log’ feature is installed or enabled all backdated entries will get recorded, including any alteration made to any entry in the Books of Account. For example, if the accountant passes an entry in the month of May 2023 pertains to the month of April 2023, then a record will be maintained in the accounting system regarding the month the entry was passed (i.e., May 2023) and the actual period that it pertains to (i.e., April 2023). This is similar to a self-installed monitoring system within the company’s accounting system in order to enhance transparency and accountability
The Companies (Accounts) Rules requires that with effect from 1st April 2023 every company which uses accounting software for maintaining books of accounts shall use such accounting software which has:
- the feature of recording audit trail of each, and every transaction;
- creating an edit log of each change made in books of accounts along with date when such change was made and
- ensure that the audit trail cannot be disabled.
It is also required to be noted the above audit trail needs to be tested by the auditors and additional reporting point must be incorporated in the Auditors report, i.e., “Whether the company has used such accounting software for maintaining its books of accounts 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 statutory record for record retention.”
Kindly go through and take steps for implementation of audit trail if it is not yet implanted. Please let us know for anything in this regard.
Please click the below link to read / download the note on audit trail.