An audit of your accounting software is not a random review. Auditors examine your accounting software to verify that your financial records are accurate, complete and supported by reliable audit trails. They review data accuracy, user access, change history and whether the information matches supporting documents, inventory records and statutory filings. A well-maintained accounting system helps reduce audit queries, speeds up the audit process and demonstrates that your financial records can be trusted.
What are the top 3 things auditors check?
Auditors primarily check the audit trail, user access controls and whether your accounting records reconcile with external documents such as bank statements and tax returns. Here are the top 3 things that an auditors usually check:
Audit trail
Auditors check whether your accounting software maintains a complete, tamper-resistant audit trail. The audit trail is a log inside your accounting software that records every entry, edit and deletion, along with the user who made the change and the timestamp. If a sales figure was altered three days before the audit, the log should show it. If it does not, that absence itself becomes a red flag.
Auditors also check whether the audit trail can be exported and whether users with administrative access can delete or modify the log. A system that allows log tampering is considered a control weakness, regardless of whether any tampering actually occurred.
Before an audit, verify that your audit trail is enabled, has been running continuously and covers the full period under review. If your software does not maintain an audit trail by default, document your manual controls instead.
User access controls
Auditors check whether user access is appropriately restricted and follows the principle of segregation of duties. This means the person who creates a purchase order should not also approve the payment. When the same user can initiate and authorise transactions, there is a fraud risk that auditors are trained to identify.
They will ask for a list of all active users, their roles and their permission levels. They will also look for dormant accounts, accounts belonging to former employees that were never deactivated and cases where a single user has administrative rights across every function.
Before the audit, generate a user access report from your software. Remove or deactivate accounts that are no longer required. If one person has permissions across multiple functions because of a small team size, document the compensating controls in place, such as a manager reviewing all transactions each month.
Check this guide to Role-Based Access and Internal Controls in TallyPrime
Reconciliation of returns with bank statements
Auditors check whether your accounting records reconcile with bank statements, tax returns and other supporting documents. They cross-reference your accounting software against external records, including bank statements, Goods and Services Tax (GST) returns, Tax Deducted at Source (TDS) records or income tax returns (depending on the audit scope), invoices and contracts.
A common issue is the timing of entries. If income appears in the software for a period different from when it was received or invoiced, auditors will want to understand why. This is not automatically a problem, but it requires a clear explanation supported by documentation.
Before the audit, reconcile your bank accounts rather than waiting until the audit begins. Ensure your GST returns match the sales and purchase figures in your ledger. If there are adjustments for prior periods, record them correctly through journal entries and include notes explaining the reason.
How does an auditor assess data completeness?
Auditors assess data completeness by verifying that all business transactions have been recorded and reconciled with supporting documents. They trace selected debits and credits from bank statements back to entries in the accounting software to identify missing transactions.
Auditors may also check invoice and voucher sequences to detect skipped or duplicated numbers, which could indicate errors or attempts to conceal transactions.
Before an audit, ensure invoices and vouchers are numbered sequentially. If an invoice was voided or there is a genuine gap, keep supporting documentation explaining the reason. Well-documented exceptions are generally easier to verify than unexplained gaps.
How can you prepare your accounting software before auditors arrive?
Prepare your accounting software by performing internal checks, reviewing key reports and ensuring your financial data is complete, accurate and ready for export before the audit begins.
- Start by generating a trial balance and comparing it period by period to identify unusual movements.
- Run an ageing analysis of debtors and creditors to confirm outstanding balances are accurate and up to date.
- Check whether any entries have been made directly to retained earnings or equity accounts without proper authorisation, as these typically attract scrutiny.
If your software supports data exports in standard formats such as Excel or CSV, prepare them in advance. Auditors often prefer to analyse data using their own tools, and having clean, export-ready files saves time and demonstrates that your records are well organised.
Conclusion
Audit readiness depends on maintaining accurate, transparent and well-controlled financial records throughout the year, not just before an audit. Accounting software with reliable audit trails, user access controls and strong reconciliation features helps businesses meet those expectations with confidence.
TallyPrime brings these capabilities together, helping businesses stay audit-ready year-round while reducing manual effort and streamlining the audit process.
