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March 2023

Audit Trail under the Companies Act, 2013

By Deepa Agarwal, Chartered Accountant
Reading Time 14 mins

The term ‘Audit trail’ has not been defined in the Companies Act, 2013 (Act) or the Companies (Accounts) Rules, 2014 (“Accounts Rules”), It implies a chronological record of the changes that have been made to the data. The Ministry of Corporate Affairs (“MCA”), in its continuing drive to improve transparency and reinforce the integrity of financial reporting, has amended the Accounts Rules requiring companies to ensure that the accounting software used to maintain books of accounts has the following features and attributes:

  • Records an audit trail of each and every transaction;
  • Creates an edit log of each change made in the books of account along with the date when such changes were made;
  • Ensuring that the audit trail is not disabled.

The Companies (Audit and Auditor) Rules, 2014 (“Audit Rules”) have been correspondingly amended wherein auditors are now required to report, as part of the auditor’s report (in the section ‘Report on Other Legal and Regulatory Requirements’, as to whether,

(a)    the accounting software used by the company being audited has the feature of recording audit trail (edit logs),

(b)    the audit trail feature was operational throughout the financial year a

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