JKL Ltd. uses accounting software for maintaining books of accounts during the financial year 2023-24. Citing the relevant feature, the aforesaid software essentially should have in accordance with the notification of th

The Ministry of Corporate Affairs through its notification issued on 24 th March, 2021, relating to Audit Trail and the same is applicable on all companies (except proprietorship concerns, Partnership firms and Limited Liability Partnership). According to the above notification, 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. Rule 3 of the (Manner of Books of Account to be Kept in Electronic Mode) of the Companies (Accounts) Rules, 2014, species that for the financial year commencing on or after the 1 st day of April, 2023. every company which uses accounting software for maintaining books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled. In view of above JKL Ltd. should use the accounting software for maintaining books of accounts having an audit trail feature. Audit Trail: 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: Any changes involved in the transaction. The person who partook in the transaction. The time at which the transaction took place. The time at which the modification or edit took place. Example of 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. Benefits of an audit trail The MCA audit trail system has several benefits, including: Increased transparency: The audit trail system provides a detailed record of all transactions, making it easier for regulators and stakeholders to monitor the activities of companies and to detect any irregularities. Improved accuracy: By requiring companies to maintain accurate electronic records, the audit trail system helps to prevent errors and omissions in financial reporting. Greater accountability: The audit trail system holds companies and their employees accountable for their actions and provides a detailed record of all changes made to electronic records. Enhanced regulatory compliance: The audit trail system helps to ensure that companies comply with various laws and regulations related to corporate governance and financial reporting. Foolproof: 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.