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The Ministry of Corporate Affairs (MCA) recently issued an amendment notification against the principal Gazette Notification No. GSR 205 (E) dated 24th March 2021 - Amendment to Rule 3(1) of Companies (Accounts) Rules 2014 which seeks to bring the audit trail rule in accounting software.
According to the amendment, the new audit trail rule in accounting software will now be implemented from 1st April,2022 which was originally planned for current year. This is a welcome move for the businesses, chartered accountants and the software providers as it provides ample time to understand the requirement and implement it.
According to the notification issued on 24th March, 2021, all the businesses who are using accounting software for maintaining books of accounts should have audit trail feature comprising of the following:
Further, Point (g) of Companies (Audit and Auditors) Amendment Rules, 2021 states ‘whether the company has used such accounting software for maintaining its books of account which has 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 feature has been preserved by the company as per the statutory requirements for record retention’
These amendments reflect a laudable intent of the government to bring in more transparency and improve compliance. Although at a conceptual and regulatory level, the requirement of audit trail is very important and apt, there were a few concerns that many associations, trade and industry bodies observed and raised with the ministry. These concerns emanated with respect to the operational areas of businesses and were highlighted to the ministry via representations made by these bodies:
The ministry has graciously recognized the concerns and has deferred the implementation of these amendments to April 1st 2022 . Over the next few weeks, we would be consulting with MCA, senior practitioners, CAs and other industry members to understand the impact and ease of application of these notifications from a practical standpoint, so that we are able to act in the best interests of not just our customers, but also act in the interest of all MSME business owners and that our product gets ready to help them comply with new audit trail rule well before it is implemented. We shall keep you posted.
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Postponement of Audit Trail Rule in Accounting Software to 1st April,2022