Actions for non followung audit trail

rocky (accountant) (942 Points)

26 March 2023

we are a company, if we won't follow audit trail from 1 april, what action kay he taken? any penalty or anyhing?

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Rakesh Ishi (Working at Private Company) (5989 Points)
Replied 27 March 2023

As per Companies Act 2013, an audit trail refers to a step-by-step record that shows how a transaction has been processed, from its origin to its final form. The Companies Act 2013 requires every company to maintain proper books of accounts with respect to transactions made by the company. The act also requires that the books of accounts be maintained in such a way that they are able to provide an audit trail of each and every transaction.

The audit trail should include the following information:

The date of the transaction
The descripttion of the transaction
The amount of the transaction
The party to the transaction
The mode of payment
The authorization of the transaction
The approval of the transaction
The recording of the transaction in the books of accounts
The posting of the transaction in the ledger
The preparation of financial statements based on the transactions

The penalty for non-compliance with the audit trail requirements under the Companies Act 2013 can range from INR 25,000 to INR 5 lakh, depending on the nature and extent of the violation. Additionally, the company may be required to rectify any deficiencies in its financial reporting and may face legal consequences if the non-compliance is deemed to be intentional or fraudulent.