News

Published: Mar 17, 2023
Updated: Mar 17, 2023

MCA Brings Major Change to Audit Trail Requirements Starting April 1st, 2023

The Ministry of Corporate Affairs (MCA) has issued three notifications that will bring significant changes to the audit trail requirements for businesses. The notifications require all companies using accounting software to employ software that maintains an audit trail of every transaction, including any modifications made to the books of account, while also ensuring that the audit trail cannot be disabled.

Move to curb fraudulent practices

Implementation of the new rules was originally slated for April 1st, 2022, but was pushed back to April 1st, 2023 by the notification of March 31, 2022.

The MCA notifications require that accounting software used by businesses must maintain an audit trail of each transaction, an edit log of each change made in the books of account, and prevent the audit trail from being disabled.

Auditors have suggested that deleted transactions should also be covered in the audit trail. They must also modify their audit processes and internal control inspections, and any deviation discovered must be disclosed in their reporting.

Will promote transparency and accountability

The objective of these notifications is to ensure financial transparency and accountability. The use of accounting software with audit trail features can help prevent financial fraud and ensure accurate financial records for businesses.

These provisions will bring significant changes to the Companies (Accounts) Regulations, 2014. Starting from April 1st, 2023, stakeholders will need to ensure that their company's accounting software meets the above requirements or move to a software that does.

Businesses must take note of the new MCA notifications and ensure that their accounting software complies with the new audit trail requirements. Compliance will help businesses avoid financial fraud and ensure accurate financial records, while auditors will need to adjust their processes and reporting to reflect the new rules.