The Ministry of Corporate Affairs (MCA) issued a notification directing companies that use accounting software for maintaining their books of account is required to have an Audit Trail feature, creating an edit log of all transactional changes along with the date.
According to the recent notification, the new audit trail rule in accounting software will now be implemented from 1st April,2023. This was originally planned for 2021 and but later the effective date was moved to 1st April,2022. Now, it is postponed to 1st April, 2023.
To ensure that this is being implemented, companies need to ensure that their existing accounting software comprises an audit trail feature to remain compliant to the latest amendment. With this move, business entities would now be required to keep an edit log of all transactions and time stamps, with changes made in the books of account. They also need to enable their workforce to adhere to it. In case their existing software doesn’t come with this feature, they need to consider shifting to accounting software that provides the audit trail feature.
With the audit trail (edit log) mandated by MCA, you might have questions if the rule is applicable to all businesses? Applicable only for a set or type of companies? Are there any guidelines that define the business applicability of the edit log rule?
To answer, the audit trail (edit log) rule is not applicable for all businesses. This rule applies only to those companies that fall under the purview of Ministry of Corporate Affairs (MCA). In short, if your company is governed by the regulations and guidelines of MCA, you need to ensure you follow the rule from 1st April,2023.
Type of companies who should follow the rule
As per the Companies Act 2013, the new amendment released by the MCA will be applicable to the following companies, including the companies that are managed by State and Central Government, NGOs who are receiving funds from various stakeholders:
- All Public and Private Limited Companies
- One Person Companies (OPCs)
- Companies owned by Government of India
- State Government Companies
- Not-for-Profit Companies/Organization
- Nidhi Companies
Businesses who are outside the purview of audit trail rule
The following businesses don’t fall under the purview of the audit trail rule:
- Proprietorship concerns
- Partnership firms
- LLP-Limited Liability Partnership
Reasons and implications of the new audit trail rule
It is undeniable that having an end-to-end log of all financial events like purchases, sales, and expenses can be proven beneficial to back trace any anomalies in the system. The edit log would, further, enable businesses to analyse each activity, thereby helping in remaining compliant.
The new rule has been introduced to bring transparency and restrict or reduce data manipulation of companies. This also implies that all accounting software is required to have the Audit Trail feature to ensure that their users are compliant with the new amendment and must comprise of the following enhancements:
- Track and create an edit log of all transactional changes made in the books of account
- Capture all timeline details like date whenever any changes are done
- Accounting software must ensure that the edit log cannot be disabled
Audit trail (edit log) features of TallyPrime Edit Log Release 2.1
The latest release ‘TallyPrime Edit Log Release 2.1‘, is enhanced with the edit log feature that caters to the amendment released by the Ministry of Corporate Affairs (MCA). Following are the features of TallyPrime edit log release:
- Track the edits for masters and every transaction
- Capture the date details and username when such changes (edits) are made
- Difference report to show the elements of the version that have been modified
- Reports are enhanced to filter the edited transactions
- Designed to ensure edit log feature will be enabled all the time to meet the MCA guidelines of ‘Edit trail cannot be disabled.
Watch the above video to see how to use audit trial rule