Auditor's Opion on Financial Statement

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Piyush (Querist)
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23 October 2025 If Pvt Ltd Co, does not having feature of Audit trail in its accounting system,
As an auditor do we have to give disclaimer of opinion for Statutory Audit ?

Will opinion be be the same for Tax Audit?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2025 As per the Ministry of Corporate Affairs (MCA) mandate effective from April 1, 2023, every company maintaining electronic books of accounts must use accounting software having an audit trail feature that is operational throughout the year and cannot be tampered with.

The auditor’s duty under Rule 11(g) is to report whether such software was used and whether the feature was active and preserved.

If the company’s software lacks this feature, the auditor must modify the reporting under Rule 11(g) to reflect non-compliance. The wording may resemble:

“The company has used accounting software for maintaining its books of account; however, the software does not have the required audit trail feature as mandated under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014.”

As per SA 705 (Modifications to the Opinion in the Independent Auditor’s Report), a disclaimer of opinion is only required when the auditor cannot obtain sufficient appropriate audit evidence and such limitation is material and pervasive.

Missing audit trail, by itself, does not automatically lead to a disclaimer unless it causes a loss of audit evidence that prevents the auditor from forming an opinion on material aspects of the financial statements.
The auditor should issue an unmodified or qualified opinion, with a specific remark under “Other Legal and Regulatory Requirements,” rather than a disclaimer.

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2025 Under the Income-tax Act, 1961 (Section 44AB) and the ICAI’s 2025 Guidance Note on Tax Audit, there is no specific requirement to verify the audit trail feature in the accounting software.

The tax audit focuses on verifying particulars in Form 3CD, such as turnover, deductions, and compliance with financial reporting norms.

Therefore, absence of an audit trail feature does not affect the tax audit opinion, except that the tax auditor may include a disclaimer or note in the report if it impacts the accuracy or reliability of accounting records.

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