Why is your auditor asking whether your accounting software has an audit trail?
Companies must use accounting software that records every change to books of account. Auditors now report on whether this was done.
- Published
- Reading time
- 4 min
- Level
- Foundation
01 The question
Your auditor has asked for evidence that the “edit log” in your accounting system was switched on all year. Why does it matter?
02 Short answer
From financial years beginning 1 April 2023, companies using accounting software must use software that records an audit trail of every transaction, with an edit log that cannot be disabled. Auditors must report on whether this feature operated throughout the year and was not tampered with.
03 The rule
The proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 requires companies to use accounting software that has a feature of recording an audit trail of each transaction, creating an edit log of each change made in books of account, along with the date of the change.
Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 requires the auditor to report on this. ICAI has issued an Implementation Guide to assist auditors.
04 Simple example
Scenario
Tapti Logistics upgraded its ERP in October. The new system had audit trail enabled from day one, but the old system did not.
The auditor will likely report that the audit trail feature did not operate for the full year, covering the period April to September.
Such reporting is visible to lenders, investors and regulators — so it can affect perception even if the books are otherwise accurate.
05 Why it matters
It strengthens the reliability of financial records, but it also exposes gaps in legacy systems and manual journal processes.
Database-level changes, not just application-level ones, can come under review.
06 Practical takeaway
- 01Confirm with your software vendor that audit trail cannot be disabled.
- 02Extend controls to any integrated systems feeding the books.
- 03Preserve audit trail records for the statutory retention period.
07 Source / reference
- Companies (Accounts) Rules, 2014 — Rule 3(1)
- Companies (Audit and Auditors) Rules, 2014 — Rule 11(g)
- ICAI Implementation Guide on Audit Trail
References are to the provisions as generally understood at the time of writing. Provisions may since have been amended, renumbered (including under the Income-tax Act, 2025) or interpreted differently.
8. Educational disclaimer
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