The Ministry of Corporate Affairs i.e. MCA has made it mandatory to maintain audit trials of all their transactions in their accounting softwares.
The main reason for introduction of maintenance of Audit Trail in Accounting Software’s in to increase more transparency and accountability into the business operations or business transactions you can say.

The MCA has issued a notification regarding Companies (Accounts) Amendment Rules, 2021 and Companies (Audit and Auditors) Amendment Rules, 2021 dated 24-03-2021 and subsequent notification dated 01-04-2022 which includes audit trail in accounting software’s for companies mandatory w.e.f 01-04-2021 as new sub rule to Section 128 of Companies Act, 2013. However, later it was postponed to future dates and now they are mandatory finally w.e.f 01-04-2023.

It says that Every Company which maintains its Books of Accounts in an electronic mode needs to use such Accounting Software’s which provides Audit Trails. It provides Audit Log which provides information related to all modification done to the Financial Transactions. Now, the Companies needs to mandatorily use such software’s where the function of Audit Trial is available and the functationlity of Audit Trial is enabled.

The Auditor is responsible for ensuring that the Company has maintained the Books of Accounts in such Accounting Software’s where Audit Trial in enabled. If not, the Auditor needs to include the same in his/her Audit Report their views or opinions for the same not only at the time of Audit but throughout the year. The Auditors also needs to check the authenticity of the Audit Trial and also to check whether the same has been tempered or not.

As per Companies (Audit and Auditors) Amendment Rules, 2021, effective from 01st April, 2021 and Companies (Audit and Auditors) Second Amendment Rules, 2021, effective from 01st April, 2021, following clause is inserted in Rule 11 of Companies (Audit and Auditors) Rules, 2014 on which Auditor of the Company will give their views and comments while preparing audit report:

“Whether the company, in respect of financial years commencing on or after the 1st April, 2023 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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