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The Tax Publishers Companies Act, 2013--Audit Trail All About Audit Trail on Companies CA. Deepak Harwani The Ministry of Corporate Affairs has inserted a proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 which provides that from 1st April 2023 every company is mandatorily required to have a Audit Trail feature in its accounting software. The Learned Author discusses this hotly debated topic in this write up. 1. MCA Notification on Audit trail in Accounting software By way of Notification No. G.S.R. 206(E) dated 24-3-2021, The Ministry of Corporate Affairs had inserted a proviso to rule 3(1) of the Companies (Accounts) Rules, 2014, that from the financial year 2021-22, every company whether big or small, including not-for-profit companies licensed under section 8 of the Indian Companies Act 2013 which uses accounting software for maintaining its books of account-: 1. Shall use only such accounting software which has a feature of recording audit trail of each and every transaction 2. Creating an edit log of each change made in books of account along with the date when such changes were made 3. Ensuring that the audit trail cannot be disabled. Later on by amending Companies (Accounts) Second Amendment Rules, 2021, applicability of such notification was deferred by 1 year & then again it was deferred by 1 more year. Hence finally with effect from 1-4-2023, such notification is applicable in a full fledged way. Though the notification is applicable to Not-for-profit companies registered under section 8 of the Companies Act 2013, but Public charitable trusts, societies registered under the Societies Registration Act, 1860 & Limited liability Partnership (LLP) Firms are not covered. 2. Concept of Audit trail An audit trail is a process of maintaining a complete record of all the transactions (Financial, Operational or Administrative) in a company, which consists information about who initiated the transaction, when it was initiated, and the nature of the transaction in a systematic & chronological order. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Companies Act, 2013--Audit Trail

All About Audit Trail on Companies

CA. Deepak Harwani

The Ministry of Corporate Affairs has inserted a proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 which provides that from 1st April 2023 every company is mandatorily required to have a Audit Trail feature in its accounting software. The Learned Author discusses this hotly debated topic in this write up.

1. MCA Notification on Audit trail in Accounting software

By way of Notification No. G.S.R. 206(E) dated 24-3-2021, The Ministry of Corporate Affairs had inserted a proviso to rule 3(1) of the Companies (Accounts) Rules, 2014, that from the financial year 2021-22, every company whether big or small, including not-for-profit companies licensed under section 8 of the Indian Companies Act 2013 which uses accounting software for maintaining its books of account-:

1. Shall use only such accounting software which has a feature of recording audit trail of each and every transaction

2. Creating an edit log of each change made in books of account along with the date when such changes were made

3. Ensuring that the audit trail cannot be disabled.

Later on by amending Companies (Accounts) Second Amendment Rules, 2021, applicability of such notification was deferred by 1 year & then again it was deferred by 1 more year. Hence finally with effect from 1-4-2023, such notification is applicable in a full fledged way.

Though the notification is applicable to Not-for-profit companies registered under section 8 of the Companies Act 2013, but Public charitable trusts, societies registered under the Societies Registration Act, 1860 & Limited liability Partnership (LLP) Firms are not covered.

2. Concept of Audit trail

An audit trail is a process of maintaining a complete record of all the transactions (Financial, Operational or Administrative) in a company, which consists information about who initiated the transaction, when it was initiated, and the nature of the transaction in a systematic & chronological order.