Notification from the government on the audit trail
Companies have been granted a year to implement the Ministry of Corporate Affairs' latest change in accounting software to use the audit trail (edit log) feature. The audit trail will be mandatory for private limited firms starting April 1, 2022, according to a decision made this year.
However, Notification MCA, in a letter dated March 31, 2022, states that the deadline for using accounting software with an audit trail feature has been extended.
The deadline for audit trail applicability has been extended to April 1, 2023. This is welcome news for businesses that have yet to implement the audit trail system.
What is the Audit Trail's purpose?
You have to deal with a lot of transaction data when running a business. Multiple changes must be made to these data, and keeping track of them might be difficult.
If you have a system in place that streamlines your transaction process and records every change made to a transaction, your work becomes a lot easier. Using an audit trail accomplishes the same thing. It keeps track of all transactions and changes made to the system.
The purpose of this legislation, you could say, is to progress towards a more transparent economy.
All businesses that uses best accounting software should check to see if it includes an audit trail option. Every transaction made using the software must be logged in an audit trail to ensure that it is verified and accurate.
What is an audit trail, and why is it useful to businesses?
A system that tracks the complicated transactions linked with each item in a financial record is known as an audit trail. It records your transaction history, from the time the transaction was initiated to the most recent update and keeps track of any changes made to your transactions.
You'll be able to identify the cause of the problem in your business transactions this way. You'll be able to detect irregularities, avoid internal fraud, and track down the person who made any transaction changes.
Furthermore, correct financials may aid in the strengthening of your company's position, gain higher investor trust, and make it easier to secure loans.
Audit Trail's Advantages
- Boost your tax compliance
- Tax avoidance should be reduced.
- Reduce financial mismanagement.
- Maintaining transparency is essential.
- Detection of Fraud
- Increase the accuracy of your business.
- Documents your business actions in a dependable manner.
- Boost your company's efficiency and security.
Audit Trail's Most Important Implications (Edit Log) Notification
This new policy (audit trail) was implemented in order to improve transparency and reduce data anomalies. The audit trail (edit log) feature is required for accounting software users. Some of the important points highlighted in the notification are as follows:
- Any change in transactions should be traceable using the company's accounting software.
- It should be able to keep track of the dates and times of any changes.
- It must also ensure that the audit trail (edit log) cannot be disabled.
- The edit log feature is required to be used at all times throughout the year and cannot be altered.
- The audit trail (edit log) must be retained in compliance with record retention guidelines.
- CAs are also required to attest to whether or not accounting software is compliant with the rule.
Accounting Software Features to View in the Audit Trail (Edit Log)
It's critical to understand what features you should look for in your accounting software in order to use the audit trail (edit log) feature. Let's go into the details of the features that accounting software must have:
The ability to edit the log should not be disabled. The audit log should be preserved until the accounting records are no longer valid if the firm needs to keep them.
A timeline stamp is included in the accounting program. On a date-by-date basis, the audit trail (edit log) should maintain track of all operations performed in the software.
All transactional changes should be tracked by the software. The accounting software should track and monitor all changes to the transaction, which should then be reported in the audit log. (from the establishment of the transaction to its modification and deletion)
The software offers a function that allows you to record user information. The accounting software should record login information from creation to modification to deletion.
The software should be able to tell the difference between a technical log and an audit log. Under no circumstances should the audit log be confused with program logging. To comply with the new rules, businesses must verify that their accounting software includes suitable records for software faults as well as a dedicated audit trail.
Conclusion
Having an audit trail may be quite beneficial to the organization.
RetailGraph allows you to manage your money effectively with these processes in place. In no time, your company will be audit-ready.
If you want any further information, please do not hesitate to contact our SWIL team. The experts will be able to help you find the top accounting software in India more quickly.
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