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An audit trail, at its most basic, is a record of financial transactions. The audit trail is, however, not simply a record: it is listed in order, step-by-step, and serves as proof of a transaction’s history, right from recording to tracking all changes that may take place. They can be used to keep track of and verify various types of transactions.
In different industries, there are various ways of maintaining records for audit trails. In the financial sector, the record of each transaction, whether it is income or expenditure, taxes paid, rebates received, are meticulously noted so that the figure reflected in the bottom line can be verified. It is as simple as keeping all your receipts so you can prove you paid for the product. In the Information Technology sector, the logs of computer data, even keystrokes, IP addresses, and names of sites visited are stored so that a trail is maintained to check for compliance breaches.
|5 Features to Evaluate Audit Trail Accounting Software|
The audit can be done internally by the company itself to make sure that the books have been maintained correctly. They can bring in an external auditor to go through the records to find anything amiss. The auditor usually also provides a report with their own analysis and suggestions about the company’s status. There is also a government audit where governments can look into a company’s records to check for mismanagement of funds or tax evasions.
This is why an audit trail is helpful. It is useful to trace all events right from transactions entered into the books of accounts to all the changes such as alteration, deletion, etc. that may take place.
According to the notification issued by the Ministry of Corporate Affairs (MCA), businesses that fall under the purview of MCA and use accounting software for maintaining books of accounts should have an audit trail feature. The accounting software used by such businesses should create an edit log of each and every transaction with changes made in the books of accounts. The software should capture the date details when such changes (edits) are made and ensure the edit trail cannot be disabled.
In simple words, the expectation is to maintain the edit log of every transition right from recording to tracking the changes that may take place.
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 1s April,2022. Now, it is postponed to 1st April, 2023.
Audit trails must have a few key details to provide comprehensive information about a transaction. To get these details at an enterprise level, however, a certain audit trail framework must be set up. Every access made to the accounts and records of the company should be tracked. Every edit made to any information must be recorded with the name of the person who did it and the time it was done. If any information was deleted, that also should be recorded.
Following are the key financial details to track as part of the audit trail:
Accounting software provides the ideal example for audit trails. Once you enter a transaction in the software, the software will maintain a record of it. Any further edits made to the details, such as a change in the amount or change in the name against which the entry is made, will also be tracked by the software along with the user who made the changes and the time it was changed. Even if some transaction were to be deleted, the software will track that as well and keep the record of everything since the original entry was made.
This means that every transaction can be checked from its entry to its deletion. This eliminates the chance of anyone making fraudulent changes that cannot be traced and reduces the stress on business owners
The main reason for documenting everything that a company or its employees do is to have a record that can be revisited if the need arises. In case of any discrepancy, you have a pathway that can lead to the erring or fraudulent transaction which is causing the discrepancy. The trail is basically a way to ensure that there are no gaps in data that may lead to a blind spot, making it impossible to determine the cause of the error. It also enables the company to locate external breaches and interference. It is also a mandatory requirement for notified companies to stay compliant.
There are several internal and external benefits of having a strong audit trail. It makes sure that everyone who is involved in transacting business has the details of their actions are being recorded. This draws a clear path to hold a user who may have undertaken a fraudulent or erroneous transaction.
If someone is not authorized to perform a certain activity, that will also be recorded. It will help in detecting that an unwanted entity has access to information they should not and help bolster security.
There is also the advantage of proving that the company books are clean and in a healthy state which gives a big boost in the valuation of the company as well as generating funds through loans or by raising capital.
There is the obvious advantage of staying compliant with the laws of the land as well as internal policies.
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:
Read More About Audit Trail
Why do We Need an Audit Trail (Edit Log) for Businesses, 5 Features to Look in Audit Trail (Edit Log) Accounting Software, Audit Trail – Edit Log the New Statutory Watch Guard for Businesses, How Audit Trail (Edit log) can Lead to Increased Compliance and Transparency
Audit Trail Rule
Audit Trail (Edit Log) Rule in Accounting Software, Business Impact of Audit Trail (Edit Log) Rule, Key Requirements of the Audit Trail (Edit Log) Rule Issued by MCA, Audit Trail Rule (Edit Log) Applicability – Businesses who Should Follow the Rule from April 2022, How to Prepare your Business for Audit Trail (Edit Log) Rule
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