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CMA Intermediate · Corporate Accounting and Auditing · Application of Technology in Audit and Audit Trail

Under the Companies (Accounts) Rules, 2014, a company that uses accounting software for maintaining its books of account must ensure that the software has a feature that does which of the following?

The company must use accounting software that records an audit trail of every transaction, creates an edit log of each change to books of account, and has this feature operating throughout the year without being disabled. Selective, threshold-based or switchable audit trails do not meet the requirement.

  1. ARecords an audit trail of each and every transaction, creates an edit log of each change made in the books of account, and cannot be disabledCorrect
  2. BAllows the finance head to switch off the edit log when large volumes of entries are being uploaded
  3. CRecords the audit trail only for transactions above a threshold fixed by the board
  4. DMaintains the edit log only for the closing month of the financial year

Explanation

The rule requires accounting software with an audit trail of each and every transaction, an edit log of each change with date of change, and the feature must not be disabled. Options allowing switch-off, thresholds or only year-end coverage contradict the requirement of completeness and non-disablement.

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