It will be implemented from 1st April so that govt can track all financial transactions
In a recent regulation from the Union Ministry of company affairs, companies will only use the accounting software that has a feature of recording audit trail of each and every transaction, creating an edit log of every change made in books of account.
As per the notification, it is mandatory for companies to use accounting software to record the audit trail of every financial transaction.
Provided that for the financial year commencing on or after the 1st day of April, 2021, the Union Ministry of Corporate Affairs said in a notification that every company which uses accounting software for maintaining its books of account.
“Companies shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled,” states the Union Ministry of Corporate Affairs said in a notification.
The ministry also said companies must provide details of the application made or any proceeding under the Insolvency and Bankruptcy Code (IBC), as well as the details of the difference between the amount of the valuation done at the time of one-time settlement and the valuation done while taking a loan from financial institutions.
The new rules are part of the amendments made to the Companies (Accounts) Rules.
According to the notification, in rule 8, in sub-rule (5), after clause (x), the following clauses shall be inserted namely:-“(xi) the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year. (xii) the details of the difference between the amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.
The audit trail mandatory is enormous and ensures transparency in the system. Since not many software companies provide the functionality of keeping an audit trail currently, they will have to transition to new software which will be a challenge.
HostBooks Founder and Chairman Kapil Rana said the software providers also need to update and build audit trail functionality in their product offerings to comply with the new changes and sustain their businesses.
“This move will also enable tax departments to have better control over tax evasion and maintain books of accounts in a true and correct manner, which eventually will result in a surge in the tax revenue collection and give a boost to the economy,” said Kapil Rana.
Secondly, Zoho Books has been part of the larger finance suite of apps, Zoho Books brings global best practices and compliance norms like audit trail, GDPR.
The integrated finance suite of apps has all bases covered when it comes to managing key back-office operations such as invoicing, payments, travel expense management, inventory management, banking, and accounting.
Several thousands of companies manage their business accounting and other finance operations using Zoho Finance suite of apps provide a comprehensive audit trail, and good integrity controls are the bedrock of an accounting system that produces financial statements which auditors can confidently vouch for.
“In this spirit, the government of India is directing all companies to adopt accounting software with audit trail functionality. It is essential for businesses to invest in a cloud-based accounting system like Zoho Books that is compliant by design,” said Zoho head of Product – Global tax, accounting and payroll Prashant Ganti.
“This would not only help businesses with today’s compliance needs like automatically capturing the audit trail but, also the ones that will be introduced in the future, with minimal intervention from the user,” Prashant Ganti,