Companies use accounting software to check the audit. The software records the data, and it is essential to document the timely changes made to the data. The audit trail is for companies with software backup. Previously it is said by MCA that in a small business, where the accounting and other data are maintained manually no need for an audit trail. Now, it has become mandatory to have software for audits. The Banks, SEC, and NYSE do audit trials to check the funds in the account and the trading transactions. In addition to the audit trail, the regulators ask for forensic accounting depending on the history or data.

Why do companies need audit trials?

Big corporations find it difficult to allocate time and money for different operations. The audit log and trial system help in curbing fraud and financial crime. The sensitivity of the data urges the company to maintain audit logs. The audit log records the following things: history of transactions, time of the event, user information, and impacted entity. Audit trail guidelines are only for companies with software backup. It does not apply to companies with departments working on a manual basis. Listed companies and big corporates use software to record the audit process.

Guidelines for audit trial:

The auditor guide helps the auditors to increase transparency and accuracy. The reliability of financial data is essential for businesses with multiple branches. The voluminous data need to be tracked with the proper system to update the history and reason for the changes made. MCA is making changes to the edit logs, accounting software and reporting.  The following guidelines explain the format to record in the audit log:

Introduction to amendments of companies rules, 2014:

Management’s responsibility:

Introduction of the implementation guide:

The implementation guide is the set of rules that guide the auditor about the performance. The books of accounts and accounting software should be reliable and transparent. The implementation guide explains the various scenarios faced during the reporting process. The implementation guide helps perform the duties efficiently. AASB of ICAI issued the implementation guide.

Auditor’s responsibility:

Applicability:

MCA announced that with effect from 1st April 2023, the small, big, not-for-profit companies, and companies registered under the company’s act 2023, section 8 must use the software mechanism. The software for the audit trial should have the edit and other features mentioned by the institute.

Preservation of audit trials:

MCA states that management should preserve the records in the audit process for eight years.

Other guidelines:

The main guidelines are the implementation report, auditor responsibility, auditor responsibility, period and applicability. The other guidelines are about the audit approach, special consideration of fraud scenarios, words used in the report, reporting under rule 11(g), audit documentation, written representation, glossary of terms, illustration of accounting software and management representation letter. The audit report consists of five divisions. They are as follows: title of the report, opening paragraph, addressee details, scope paragraph, opinion paragraph, signature and place.

Final Words:

The audit trial software brings transparency and maintenance of the data with quality. The regulatory body insists on quality standards. The data and numbers change during the final report preparation. Maintaining the history of the accounting process and auditing calculations helps maintain perfection.

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