Key Requirements of the Audit Trail (Edit Log) Rule Issued by MCA

The Ministry of Corporate Affairs issued an amendment to the Companies (Accounts) Rules on 24th March 2021. One of the amendments will mark a historic shift in technology for accounting and bookkeeping by all companies from 1st day of April 2023. The notification impacts various businesses, including MSMEs, auditors and accounting software providers, from FY 2023-24.

In Rule 3(1) of the Company (Accounts) Amendment Rules, 2021, a new proviso is inserted. As per the new proviso, companies that use accounting software for maintaining ledgers and books of accounts must take a note. Henceforth, it must use such accounting software that records an audit trail for every transaction effected.

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.

As MCA's requirement, the audit trail feature should create an edit log for any changes made on transactions and record the date of each change being made and cannot be disabled.

This would enable businesses to track all financial activities while helping to maintain transparency and detecting fraud. It would maintain an edit log of any changes made pertaining to various financial transactions, thereby improving business accuracy.

Key implications of the audit trail (edit log) notification

While the new rule has been implemented to bring in transparency and reduce data anomalies, mandating businesses that are using accounting software to have the audit trail (edit log) feature, here are some major aspects that notification emphasizes:

• The accounting software that the company is using should have the capability to track each and every change made in transactions
• It should be able to capture the dates and timelines when such changes were made
• Further, it needs to ensure that the audit trail (edit log) cannot be disabled
• The edit log facility is required to be operated throughout the year and can't be tampered with
• The audit trail (edit log) is required to be preserved according to the requirement of the record retention
• The rule also mandates CAs to certify whether the accounting software being used is compliant or not

Audit trail (edit log) features to look for in accounting software

While it has been clear that companies that fall under the purview of the MCA notifications need to have accounting software that comes with the audit trail (edit log) feature, the question that remains is what all aspects you should consider while making the shift. To answer this, here's a detailed insight into the features to look for in accounting software:

• Timeline stamp: The audit trail (edit log) should record all the details of actions performed in the software in a date-wise manner.
• Track all transactional changes: The accounting software should monitor and track all the changes made to the transaction and capture such details in the audit log. Essentially, the software should track and log changes right from creation to alteration to deletion of transactions.
• Edit log shouldn't be disabled: If books of accounts are valid and the company needs to keep them, under such circumstances, the audit log should be maintained till the validity of the records.
• Technical log vs. audit log: Under any circumstances, the audit log should not be confused with software logging. While opting for accounting software, businesses need to ensure that the system has respective logs for software issues and dedicated audit trail to remain compliant with the new rule.
• Capture user details: The accounting software should capture username details right from creation to alteration to deletion. This would further help companies to get enhanced transparency.
• Should provide version history and difference: To further enhance business transparency, the accounting software should be able to provide you with the version difference and allow you to compare different versions to analyze and understand what all has been changed or modified.
• Sequential order: The audit trail (edit log) feature should capture a detailed and chronological insight of actions performed by date and time.

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 the 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 the edit log feature will be enabled all the time to meet the MCA guidelines of 'Edit trail cannot be disabled.

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