The rules are however silent on the following aspects:
a) The Rules don’t specify the fields or data sets for which audit trails are required to be maintained – whether transactional data and/or data pertaining to the transaction.
b) The word accounting software has not been defined anywhere in the act/rules. Will it include fixed asset registers, HR related documents and data/software, time sheets of employees, purchase orders, changes to vendor master data, or any other software with which the basic accounting software has an interface. If it so includes then an audit trail for all those associated software will also have to be verified. c) Accounts rules requires back up to be maintained on a daily basis, does it mean that audit trail back up also needs to be taken on daily basis? Doing so would require huge IT space for which companies need to plan in advance. d) The accounts rules mandate that companies should use accounting software which has a feature of recording audit trail….. In case a company is not able to procure such a software or has procured midway will it be construed as non-compliance with the Companies Act, 2013 for which the company, its Directors and its KMP may be penalized. Some thoughts on audit trail and audit requirements
1) No other country in the world has such a mandatory requirement for maintaining books of accounts and for auditors of companies to comment on audit trail. A spate of failures of financial institutions and large corporations has led the government to bring about these measures whereby the government hopes to get details of transactions which have been deleted/modified. One is not sure how such audit trail data would even be helpful as companies will only give justification as to why the deletion or modification was done, if at all the audit trail data is available to government authorities when it is required.
2) Work of finance professionals is going to increase as they have to pass entries with 100% accuracy first time around. Any modification/deletion will leave an audit trail scar for them to answer.
3) This requirement casts a huge responsibility for small companies who cannot afford such a software and even if they can afford the cost of maintaining books of accounts in such a software is going to be a challenge in terms of cost and finding right man-power.
4) Already this audit trail requirement has been postponed twice, so one needs to watch the space for notification/guidance from MCA or ICAI and typically this is going to come (if at all) only on 31st March 2023 (Friday). If it does not come, then ALL companies will be caught in the wrong foot from the first day of the new financial year if they are not adequately prepared.
5) IT systems of companies was subject to audit by auditors only in large companies, now with the introduction of audit trail and reporting thereon, auditors will have to do an audit of IT environment of all companies. This is going to consume more audit time and will result in higher audit cost for companies.
6) Auditors should be equipped (in terms of IT knowledge and related resources) for performing this kind of audit and of course that is going to come only from 1st April 2023, so auditors might have some time to catch up.
7) ALL companies will have to immediately take a look at their accounting software and check if it has all these features. They will have to get in touch with their auditors and understand their requirements as lack of such co-ordination will lead to missed communication during audit time.
As Per Information From
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.mca.gov.in/Ministry/pdf/AuditAuditorsAmendmentRules_24032021.pdf