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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 using accounting software for maintaining its books of account must use software that has a feature of recording audit trail of each and every transaction. Which further requirement applies to this audit trail?

The audit trail must be operational throughout the year for all transactions, cannot be disabled, and must be retained according to the statutory record retention requirements. Year-end only logging, discretionary disabling by management, or retention only until the AGM does not satisfy the rule.

  1. AIt must be created only at the year-end and may be switched off during the year
  2. BIt can be disabled by the company's finance head if system performance is affected
  3. CIt must be retained only until the financial statements are adopted at the AGM
  4. DIt must not be disabled throughout the year and must be retained as per statutory requirements for record retentionCorrect

Explanation

The rule requires that the audit trail feature be operated throughout the year for all transactions, that the edit log creation of each change be captured with date, and that the audit trail not be disabled. It must also be preserved as per the statutory retention requirements. Switching it off or keeping it only until the AGM breaches this.

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