• By ADMIN
• Posted 18 Mar, 2023
• 1121
• 0

Mandatory maintenance of "edit log" by Companies

Mr.Prabu Mohan B.Com (CS)

With effect from 1st day of April 2023, every company which uses accounting software for maintaining its 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.

The objective of mandating the requirement of an audit trail feature in accounting software was to mitigate the chances of fraudulent transactions or manipulation in the books of accounts of the company and to bring in more transparency.

1. What is an Audit Trail?

An audit trail is a chronological record that captures the sequence of activities or events that lead to a specific transaction or decision.  It provides a clear and detailed account of who performed the action, when it was performed, and the reason for the action. The purpose of an audit trail is to promote transparency and accountability in financial transactions and to prevent fraud, errors, and other irregularities.

2. What is edit log?

An edit log is a record of changes made to a document or file, capturing details such as who made the change, when it was made, and the reason for the change. Edit logs can be electronic or manual and help in tracking the history of changes made to a document or file, providing evidence of the changes.

3. How long the edit log/audit trial to be preserved?

It should be preserved for 8 years.

4. Consequences of non-Compliance

If the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with the duty of complying with the provisions of this section, contravenes such provisions, such managing director, whole-time director in charge of finance, Chief Financial officer or such other person of the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees 

5. Responsibility of Auditors

Auditors in his report has to report as to whether the company has used such accounting software for maintaining its books of accounts 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.