- DEFINITION
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- Audit trail is combination of two words where:
- Audit refers to examination of records
- Trail refers to series of clues that are left behind
- An audit trail is, essentially, proof of all the changes made to your financial data
- In general it is the history of a particular document since its creation
- PURPOSE
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- Audit is a vast task depending on the financial statement there are some inherent limitation of audit that an auditor is not expected to mitigate the risk to zero.
- Intentionally committed fraud are difficult to identified or where there is involvement of top level management.
- Where client use to commit fraud most common method is by manipulating the records
- Earlier there was not any track that who has made the changes in financial records and the fraud cannot be identified by whom it is committed
- Audit trails works like a spy for an Auditor to track the changes in records that can make scrutiny task reliable
- An audit trail is primarily put together to prove that this information is verified, and it’s one of the best practices that your business can follow
- BENEFITS
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- Tracks user activities
- Prevents fraud
- Smooth audits
- HOW TO MAINTAIN AN AUDIT TRAIL
- Audit trails begin with the source document, whether that’s an invoice, receipt, or purchase order. If you’re opting to maintain an audit trail via a ledger, you would need to attach the physical documents along with it as proof. Instead of doing it the manual way, letting your software do the work for you will make things a lot easier because every change will automatically be recorded when you create a transaction. This information would be kept secure for you to revisit anytime, helping you locate any discrepancies.
- One challenge that people may come across is having to edit transactions for multiple reasons, even if there was an entry error or a change in price, and this may make it difficult to navigate through the logs. However, this can be made a lot smoother with accounting software.
- HOW ACCOUNTING SOFTWARE HELPS WITH AN AUDIT TRAIL
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- cloud accounting system is a Way where you can store all your data securely.
- Software systems equipped with an audit trail feature would usually store logs of any transactions and automatically capture any changes made to them since they were opened, along with the user’s identity, date, and time.
- IMPLEMENTATION AND CHANGE IN AUDITOR’S REPORT
MCA has issued a notification dated 24-03-2021 regarding Companies (Accounts) Amendment Rules, 2021 and Companies (Audit and Auditors) Amendment Rules, 2021, as well as a subsequent notification dated 01st April, 2023, which includes audit trail in accounting software for companies as a new sub rule to Section 128 of the Companies Act, 2013. However, it was subsequently postponed to later dates, and they are now ultimately required as of April 1, 2023.
following clause is inserted in Rule 11 of Companies (Audit and Auditors) Rules, 2014 on which Auditor of the Company will give their views and comments while preparing audit report: “Whether the company, in respect of financial years commencing on or after the 1st April, 2023 has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention.”
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