• •     Are you a company (Private Limited or Limited)?
• •     Are you using any software for maintaining your accounts?
• •    Then you are required to ensure that your software has the feature of Audit Trail from April 1, 2023.

 

What is audit trail?

 

Simply speaking, it the record that tells you:

• •    When was a particular entry made in the software
• •    Who has done it
• •  If that entry is subsequently modified, when was it modified, who made the modification, what was the modification.
• •   If that entry is subsequently deleted, when was it deleted, who made the deletion, what was the entry before deletion.

 

Modification can be in any field including date, party name, particulars, narration, inventory values, amount etc. – any correction or change or deletion in any of the data already entered.

 

Importantly, the audit trail feature should not be disabled or deleted.

 

What can be the possible impact of this?

 

This requirement is as per direction of Ministry of Corporate Affairs. But, once your software has the audit trail feature, any other department including Income Tax, GST or ED can verify the audit trail – which means they will come to know what modifications/ deletions you have made in the accounts.

 

So, you will have to be extra cautious when you make:

•       A back dated entry

•       Any modification of data already entered, including splitting of entries

•       Any cancellation or deletion of entry already made

 

You will have to explain why it happened and have to establish that such entries/modification/deletion are made for genuine reasons and not for the purpose of any tax evasion or not for covering up any violation of law.

 

Only exemption to this requirement is that you are maintaining books of accounts manually. But how far it is possible is a question.

 

So make sure that your accounting is uptodate, accurate and complies with all laws that are applicable. If you have any doubts, consult your CA before making the entry.

 

You should not pass an entry, modify it or delete it at your whims and fancies. Ensure that the entry is correct in all respects,  before passing it.

 

Any subsequent correction / deletion may invite unnecessary questions. It may open a pandora’s box, in many cases!

 

- CA. James Antony