Understanding Audit Trail Under The Companies Act, 2013

Understanding Audit Trail Under The Companies Act, 2013

The audit trail under the Companies Act 2013 is an act about chronological records, including changes made to particular data. 

The Ministry of Corporate Affairs made provisions to improve transparency and convenience for financial reporting. 

Therefore, the Ministry of Corporate Affairs took the drive to improve the integrity of data and financial reporting by amending the account rules. 

Companies should have accounting software to maintain financial books and accounts. Here's everything you need to know about the audit trail under the Companies Act 2013, described in detail by ESPECIA. 

What is an audit trail?

An audit trail is a record or register for every event, action, and activity undergone in data. Any system, software, or user can do these actions or events. 

In other words, the audit train can also be related to other terms such as deletion, modification, or creation of records. It is a bunch of automated system data actions. 

  • Companies and accounting have significantly used audit trails. The main motive of an audit trail is to trace back transactions and records.
  • The audit trail includes step-by-step transactions and records. It helps to trace and develop a relationship between financial data and trade details with their source.
  • Audit trails are most useful and utilized to verify the accuracy of data, such as in audit reports.
  • Recording the entire trail helps to trace back and look events into their origin. It also provides basic information to check the originality and creation of a record. The audit trail includes access to data, user activities, log-in activities, automated system activities, administrator activities, and others.
  • An audit trail helps to track changes made in the data and check the integrity of financial transactions.

Audit Trail under the Companies Act, 2013

According to the audit trail of the Companies Act 2013 as well as the Ministry of Corporate Affairs, the following attributes and features are included to maintain the accounting books of a company: 

  • The company should keep an audit trail of records. In other words, each and every transaction should be recorded in a company in these trials.
  • The company should make an edit log and keep the records in it. The edit log should contain each and every change that is made in accounting books. In addition, it should also include details such as the date when changes were made.
  • The companies should also make efforts and make sure that the audit trail is 100% accurate and not disabled.

The company's rules 2014 for audit as well as an auditor, also known as audit rules, have been amended many times. 

According to these rules and amendments (given in the report on other legal and regulatory requirements section), the auditors are required to report the following requirements in the auditors report: 

  • The accounting software that is being used by the auditors and the company should be mentioned in the auditor's report. These software are used to record audit trails and edit logs.
  • The audit train software, as well as a feature, is operational throughout the year. In addition, it is not tempered.
  • These audit software and Audit trails have been in use for a period as prescribed by statutory rules. 

The Ministry of Corporate Affairs stated that the amendments of rules and provisions would be effective from one April 2023. 

This also implies that the accounting software that the companies and auditors use should comply with account rules for FY 2023-24 and onwards. 

The requirement for these provisions and software was originally made for the financial year after April 2021. 

However, the provisions of the audit trail under the Companies Act 2013 were not applicable for the financial year coming on or after the first of April 2022. Therefore, the rules are applicable after the first of April 2023.

What were the objectives for amendments?

You might think that amendments made in the sections or acts were not necessary for audit trails. 

But the objectives behind the amendments for the audit trail state otherwise! Risk assessment as well as fraud detection are some of the main aspects of the audit. 

Therefore, the first main objective behind these amendments to improve the audit trail is to reduce risk and fraud. 

The existence and advantages of an audit trail as well as an edit log, have made it possible for auditors and companies to have a fair assessment of fraud and risk. 

The Ministry of Corporate Affairs has also made using and maintaining audit trails in companies compulsory. 

This is because it is one of the best ways to avoid overwriting in financial books and the fabrication of accounting books. 

Audit trails have also made it easier for persons using the software and book of accounts to track changes made to transactions or accounts. 

Therefore, the person making the changes can be held accountable or questioned to explain the reasons for the above activity.

Edit logs and Audit trails also make it convenient for companies and their management to identify employees that are accountable for embezzlement and fraud. 

An auditor has to question accountable employees and be satisfied with the response of Management based on their reasons for alteration and deletion in an audit trail.


  • Section 128(1), read with Sub-rule 1 of Rule 3 of The Companies (Accounts) Rules, 2014, states that every company using or maintaining accounting books should only use accounting software that includes a feature of audit trail recording concerning each and every transaction. It should also simultaneously make every edit log with every change in accounting books and data. This ensures that the audit trail is not disabled and the record is not fabricated.
  • The company's rule 2014 has been continuously amended. The latest amendments of companies rule 2014 states that the auditors are required to mention the software used by the company's management with the features of audit trail and edit log. 
  • The Companies Act 2013, read through Schedule III, gives the provisions related to the framework to prepare financial statements, including statements of profit and loss as well as the company's balance sheet. The main objective behind this amendment is to improve transparency in transactions and statements of the company. The person looking at the statements can also get a better idea of the functioning and management of the company.

Other aspects included in the auditor report

Section 143 Rule 11 of the companies rules 2014 states that the auditor should also include the comments as well as views in the auditor report for the following matters: 

  • Any matter regarding pending litigations in financial statements and disclosing the impact.
  • The provisions of the company are made according to the laws and accounting standards or not.
  • If there has been any delay during the transformation of the amount or transferring requirements to protection fund and investor education by the company.
  • Whether the company has shown ideal disclosures in a transaction and financial statements as in dealings and holdings. 

Read More,

Statutory Audits Services

Internal Audits Services

Stock Audits Services


An audit trail is a set of records and data maintained in the audit software of a company. 

It makes it easier to track changes and the history of the record for every transaction in the company. 

It has been made mandatory by the Ministry of Corporate Affairs. The audit trail feature in the software should not be disabled. 

The management is responsible for maintaining and implementing this feature in accounting software.

Faqs Related to Audit Trail under the Companies Act, 2013.

1. What is an audit trail according to the Companies Act 2013?

According to the Companies Act 2013, an audit trail is a step-by-step record of financial statements and accounting books which provide evidence and document history concerning its source. It makes it easier for an auditor to track a particular transaction and financial data right from its origin.

2. When is an audit trail mandatory for Companies?

The audit trail is mandatory for companies in India with effect from the first of April 2023, for every company is required to use software with a feature of audit trail and edit log.

3. For which companies' audit trail is applicable?

According to the Ministry of Corporate Affairs, audit trail and accounting software are necessary for every company. In other words, every company using accounting software must have audit trail features in them. This provision is effective from one April 2023.

4. What are the different types of audit trails?

There are different types of audit trails occurring in the companies. But the two main types of an audit trail or audit record include event-oriented logs as well as records of every keystroke. 

5. What are the requirements of an audit trail?

It's necessary to include every event and record of statements or transactions that occurred in a company. Every phase of a financial transaction, regarding the location of sale, time of sale, purchaser, seller, and other key details of that process, can be reviewed.

Contact Us for Startup Valuation Services ,Business Valuation Services ,ESOP Valuation Consultants,Fund Raising Valuation , Valuation Services , Internal Audits Services  in Delhi, Noida, Gurgaon, and all across India: write to us at accounts@especia.co.in. Or Call On :(+91)-9711021268 +91-9310165114

- Share this post on -

Especia in news

Contact us