Audit Trail Under MCA

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Audit trail under MCA
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• 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
  

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• 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  -

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• 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 2013Read
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