What is Audit Trail?
Have you struggled to find the accurate amount of a transaction to close out the month?
Maybe your team scrambled around to recognize what went wrong in the reporting cycle; or tried to identify how you achieved stronger sales last quarter.
Problems like workflow issue solutions, significant accounting errors, and budget assessments can all be answered through an intuitive audit trail.
Let’s look into the audit trail and why it is a critical feature in your accounting software.
An audit trail is an organized record to trace the foundation of financial data and provides sequential, documentary evidence of a series of events and is therefore used to verify the precision of data and track transactions.
Important information about the activity on a computer system will be available to the auditor from the audit trail. An audit trail regains the auditability of the computer system.
Various industries use versions of an audit trail to deliver a historical record of advancement based on a chain of events. These records provide operational integrity and proof of compliance.
Audit trails can also detect regions of non-compliance by providing information for audit investigations. The recent notification makes it mandatory for businesses to use accounting software that preserves the audit trail of all transactions.
Benefits and Objectives of Audit Trail
It sets individual accountability of enterprises in terms of the actions of users. It prevents the introduction of incorrect information or unapproved access to data.
Further, users are less probable to try to circumvent security policy. If the user knows that their actions are automatically recorded and tied to their unique identity.
Intrusion detection refers to the process of recognizing attempts to enter a system and gain unauthorized access. Many policies have made it obligatory for maintaining data privacy.
It extends to the protection of personal information, intellectual property, financial records, etc.
Other Problem Identification
Audit trails may also be employed as online tools to help recognize problems other than invasions as they arise. This is frequently referred to as instantaneous auditing or examining.
If a system or application is deemed important to an organization’s business or mission, instantaneous auditing may be practised to check the status of operational issues, uncommon or suspicious activities, or system errors through real-time monitoring.
Reconstruction of Events
Assessment of damage can be more effortlessly by reviewing audit trails of organization activity to identify how, when, and why normal operations terminated.
Visibility into this information can help prevent future occurrences of hacking, system failures, outages, or corruption of information and detection of these in advance.
Government Notification About Audit Trail
The Ministry of Corporate Affairs (MCA) recently delivered a notification concerning the implementation of Gazette Notification No. GSR 205 (E) dated 24th March 2021 – Amendment to Rule 3(1) of Companies (Accounts) Rules 2014 which seeks to bring a host of improvements and reforms in the way businesses function in India.
The key takeaways of the notification for the small businesses are as follows:
For the financial year beginning on or after the 1st April 2022, every business which uses accounting software for maintaining its books of account shall only use software that has an audit trail feature comprising of the following:
1. Ability to record an audit trail of every transaction
2. Creating an audit log of each change made in the books of account,
3. Capture the details of changes (edits) such as date,
4. Ensure that no disablement of audit trail happens.
With these amendments, the government intends to bring more transparency and will enable tax departments to have better control over tax evasion and maintain books of accounts in a true and correct manner, which eventually will give a boost to the Indian economy.
Trailing all of the activities surrounding a particular transaction is an audit trail. The notification has an impact on companies, software providers, and auditors.
The objective appears to be to spot (wherever allegation is levelled) manipulation of electronic accounting histories by administration of corporates to play fraud on the interests of stakeholders (investors, financiers, tax authorities) and in the process, defeat the object and purpose of the law.
How To Compy With This Rule Using ProfitBooks
Enforcing the use of audit trail for transactions recorded in accounting software by the government is a positive step in restricting transaction fraud. While the rule is important, it is up to businesses to choose the right software with all the features.
With Profitbooks, you can create professional invoices, track expenses and manage inventory. It’s a simple yet powerful tool to manage your business workflow.
In addition to core accounting, ProfitBooks offers many useful features not found in other traditional software. Some of them as listed below:
1. Powerful Inventory Management features
2. Invoicing with payment gateway integration
3. Expense Tracking
4. Support for multiple currencies
5. In-depth financial reporting
6. Audit Trail functionality
The government has shown its seriousness about minimising fraud with the launch of GST e-invoicing for businesses and this new rule about accounting software having an audit trail. It is advisable to have accounting software with an audit trail feature.
ProfitBooks maintains log a log of every change that is made to a record in an application along with the timestamp and details of the user. It makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done.
Profitbooks believes in transparent business and already has the audit trail feature. It will make your task easier and save time.
Best part is, ProfitBooks is completely free accounting software.