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CA Final · Advanced Auditing, Assurance and Professional Ethics · Digital Auditing & Assurance

During the audit of Ganga Logistics Ltd., the auditor learns that the company's accounting software has a feature allowing the administrator to delete audit trail logs. For the financial year, the company is required under the Companies (Accounts) Rules to use accounting software with an audit trail (edit log) feature that cannot be disabled. The auditor finds that the audit trail was not enabled for one module for part of the year. What is the appropriate reporting consequence?

The auditor should report the lapse in the audit report under Other Legal and Regulatory Requirements, since the auditor must state whether accounting software had an audit trail that operated throughout the year. It need not be confined to a management letter, and it does not automatically require a true-and-fair qualification.

  1. ANo reporting is needed because it is a management matter
  2. BReport it only in the management letter and not in the audit report
  3. CQualify the opinion on the financial statements as the books are void
  4. DReport under Other Legal and Regulatory Requirements in the audit report, as the matter affects compliance with the audit trail ruleCorrect

Explanation

The rules require the auditor to report on whether the company used accounting software with an audit trail that operated throughout the year and was not tampered with. A lapse is reported in that section of the audit report under the Companies (Audit and Auditors) Rules. It does not automatically void the books or require a true-and-fair qualification, and it cannot be confined to a management letter.

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