Audit trail :- It is an detailed chronological record where accounting ,financial data and other details are tracked and traced .It tracks all kinds of transactions work processes, accounting details and changes made there within and especially MCA has now made it mandatory

1. Audit trail under MCA

2. Audit trail :- It is an detailed chronological record where accounting ,financial data and other details are
tracked and traced .It tracks all kinds of transactions work processes, accounting details and changes made
there within and especially MCA has now made it mandatory .It verifies and validates financial, software
and business transactions by tracking user activity Why MCA has made it mandatory to comply with audit
trail:- It has been mandated to the companies to use Accounting software that has feature of recording an
“Audit trail” for comprehensive recording of changes made in the financial data, prevention of fraudulent
activities , reconstruction of data in case of system failure . Applicable Provisions :- MCA has introduced
the concept of ‘AUDIT TRAIL” by inserting proviso to Rule 3(1) of Companies (Accounts) Rules ,2014 as
follows

3. 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 the books of accounts along with the date when such
changes were made and ensuring that audit trail cannot be disabled w.e.f 1st April ,2023 The
Importance of an Audit Trail in Financial Reporting:- An audit trail is an essential tool for financial
reporting, as it provides a comprehensive record of all changes made to financial data, including the
date and time of the change, the user who made the change, and a description of the change. This
can help ensure the accuracy and integrity of financial data and can be used to support internal and
external audits and also helps companies to meet regulatory and compliance requirements.
Advantages :-

4. Advantages :-
Helps to detect unauthorized access, errors, and fraud
To restore data in case of any system failure
Detection of malware
Ensure data integrity and security
Helps audit team to identify any deviations
Helps in compliance with regulations
Disadvantages :– may require huge storage space as every transaction is traced and stored. Requires re- installation of new
software that supports recording of audit trail Audit trail has to be maintained for 8 years from the end of the financial year
to which it relates
Tags: Companies Act, Companies Act 2013
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