The Business Impact of Audit Trail (Edit Log) Rule

Impact of audit trail rule on businesses
|Updated on: February 24, 2022

The Ministry of Corporate Affairs (MCA) notified a rule mandating every business that uses accounting software to maintain their books of account to have an audit trail feature. The latest amendment ensures that every company maintains a record and edit log of each transaction, effective from 1st April 2022.   

As per the new audit trail rule, all accounting software must record edit logs pertaining to every transaction, and it must be reconfigured such that the audit trails cannot be disabled.   

With the implementation date approaching soon, you might be having several concerns about the impact and implications of the audit trail rule on businesses. Is it applicable to all businesses? Is your existing accounting software compliant with the new rule? What are the penalties if it doesn’t adhere to the new audit trail (edit log) rule? Do you need to change how you have been operating all these years?   

To answer that, the new amendment, which aims to bring transparency and accountability while restricting any data manipulation, will also enable better productivity for businesses.   

Audit Trail (Edit Log) Rule in Accounting Software from 1st April, 2022 Businesses who Should Follow the Audit Trail (Edit Log) Rule from April 2022

Impact of audit trail (edit log) on businesses

Companies that fall under the purview of the MCA will be impacted by the new audit trail rule. Having said that, here’s a quick rundown of the impact the new audit trail rule will have on businesses:   

  • Ensure existing software provides audit trail facility

The existing accounting software that companies are using to maintain their books of account should have the audit trail facility that would be able to log any changes that are done pertaining to any transactions.      

  • Switch to different software

Suppose the existing accounting software doesn’t have the audit trail facility or cannot enhance its capabilities within the software. In that case, companies will have to look for an alternative option to remain compliant with the new rule.   

  • Enable staff

To ensure that businesses adhere to the new audit trial rule, their staff need to be enabled to tackle the change in the accounting software. They may have to bring in some degree of change in the way they are using the accounting software.  

  • Penalties unknown at the moment

At this moment, the repercussions and penalties that companies may have to bear in case of non-compliance with the audit trail notification are not clear.  

Audit trail features accounting software should have

As per the new amendment, accounting software will be required to have the following features: 

  • Track all changes made in transactions  
  • Capture date when such changes were made  
  • Ensure that the audit trail cannot be disabled  
  • Edit log facility should be operated throughout the year  
  • Edit log should not be tampered  
  • Edit log to be preserved as per the requirement of record retention  
  • CA needs to certify if the software used is compliant or not   

TallyPrime’s upcoming features  

TallyPrime edit log release to handle the Ministry of Corporate Affairs (MCA) amendment. The upcoming product release is built with the following capabilities:   

  • Track the edits for masters and every transaction 
  • Capture the date details and username when such changes (edits) are made 
  • Difference report to show the elements of the version that have been modified 
  • Reports are enhanced to filter the edited transactions 
  • Designed to ensure edit log feature will be enabled all the time to meet the MCA guidelines of ‘Edit trail cannot be disabled.’ 

Read More About Audit Trail

Audit Trail – Meaning & Examples, Why do We Need an Audit Trail (Edit Log) for Businesses, 5 Features to Look in Audit Trail (Edit Log) Accounting Software, Audit Trail – Edit Log the New Statutory Watch Guard for Businesses, How Audit Trail (Edit log) can Lead to Increased Compliance and Transparency

Audit Trail Rule

Audit Trail (Edit Log) Rule in Accounting Software, Key Requirements of the Audit Trail (Edit Log) Rule Issued by MCA, Audit Trail Rule (Edit Log) Applicability – Businesses who Should Follow the Rule from April 2022, How to Prepare your Business for Audit Trail (Edit Log) Rule

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