The Ministry of Corporate Affairs (MCA) notified a rule mandating every business that uses accounting software to maintain their books of account to have an audit trail feature starting from 1st April 2023. The new rule mandates every company maintains a record and edit log of each transaction. 

The new audit trail rule in accounting software will be implemented from 1^st April,2023. This was originally planned for 2021 and but later the effective date was moved to 1st April,2023. 

With this new audit trail rule, all accounting software must record edit logs pertaining to every transaction, and it must be reconfigured such that the audit trails cannot be disabled.   

With audit rule notified, you might be having several concerns about the impact and implications of the audit trail rule on businesses. Is it applicable to all businesses? Is your existing accounting software compliant with the new rule? What are the penalties if it doesn’t adhere to the new audit trail (edit log) rule? Do you need to change how you have been operating all these years?   

To answer that, the new amendment, which aims to bring transparency and accountability while restricting any data manipulation, will also enable better productivity for businesses.   

Audit Trail (Edit Log) Rule in Accounting Software from 1st April,2023

Businesses who Should Follow the Audit Trail (Edit Log) Rule

Impact of audit trail (edit log) on businesses

Companies that fall under the purview of the MCA will be impacted by the new audit trail rule. Having said that, here’s a quick rundown of the impact the new audit trail rule will have on businesses:   

• Ensure existing software provides audit trail facility

The existing accounting software that companies are using to maintain their books of account should have the audit trail facility that would be able to log any changes that are done pertaining to any transactions.      

• Switch to different software

Suppose the existing accounting software doesn’t have the audit trail facility or cannot enhance its capabilities within the software. In that case, companies will have to look for an alternative option to remain compliant with the new rule.   

• Enable staff

To ensure that businesses adhere to the new audit trial rule, their staff need to be enabled to tackle the change in the accounting software. They may have to bring in some degree of change in the way they are using the accounting software.  

• Penalties unknown at the moment

At this moment, the repercussions and penalties that companies may have to bear in case of non-compliance with the audit trail notification are not clear.  

Posted on: April 23, 2024, by : Bhavin Thakkar