Penalties for Non-Adherence of MCA Notification on Audit Trail (Edit Log) w.e.f 1st April 2023

Published on: 14-08-2024

For Companies:

Penalty for Non-Compliance (Section 128(5)): If a company fails to comply with the requirements, it shall be punishable with a fine which shall not be less than ₹50,000 but which may extend to ₹5,00,000.
Further Penalties: Continued failure may lead to additional penalties as per the provisions of the Companies Act, 2013. This includes any repercussions due to inaccuracies in financial reporting resulting from tampering or lack of audit trail.

For Directors/CFO/Authorized Personnel:

Personal Liability: Officers of the company, such as the Managing Director, the Chief Financial Officer (CFO), and other persons charged with the responsibility of complying with the provisions, may be held personally liable. The penalties for them range from ₹50,000 to ₹5,00,000.
Imprisonment: In severe cases where non-compliance is proved to be willful and fraudulent, imprisonment of up to 1 year could also be imposed, alongside the financial penalties.

For Auditors:

Penalty for Non-Compliance (Section 147(2) of Companies Act, 2013): If an auditor fails to report non-compliance with the audit trail requirements or certifies inaccurate financial statements, they may be subject to a fine not less than ₹25,000 but which may extend to ₹5,00,000 or four times the remuneration of the auditor, whichever is less.
Professional Disqualification: Repeated non-compliance could lead to disciplinary action by the Institute of Chartered Accountants of India (ICAI), including suspension of the auditor's license to practice.

Conclusion:

Both companies and auditors have a significant responsibility to adhere to the MCA's notification regarding the audit trail. Non-compliance can lead to substantial financial penalties and personal liabilities, with severe cases potentially leading to imprisonment for responsible officers or professional disqualification for auditors.

This emphasizes the importance of ensuring that all accounting software used by companies is fully compliant with the audit trail requirements.

Edit Log Feature in TallyPrime

The Edit Log feature in TallyPrime meticulously tracks and timestamps every action related to transactions. Whether it’s creating, editing, or deleting records, the Edit Log captures all activities, providing auditors and business owners with a clear and detailed record to analyze the impact of any changes.

Key Features of the Edit Log in TallyPrime

Tracking for Transactions and Masters:
TallyPrime’s new audit trail feature monitors all activities, including creation, alteration, and deletion, for every transaction recorded. In addition to transactions, it also tracks changes made to masters such as ledgers, stock items, groups, and company master details.

Identifying Who Made Changes and When:
Understanding who made changes and when they occurred is crucial for a comprehensive audit. TallyPrime’s Edit Log feature captures user details for each action—creation, modification, or deletion—along with the corresponding date.

Version Comparison:
One of the strengths of the audit trail is its ability to provide a complete picture of changes. TallyPrime allows users to compare different versions of a transaction, making it easy to identify what has been modified.

Enhanced Reporting:
Reports such as daybooks and voucher registers are enhanced with options to filter and sort edited or deleted transactions, allowing for quick access to relevant information.

Continuous Edit Log vs. On-Demand Viewing

The need for an Edit Log varies depending on internal controls or statutory requirements. Some businesses may require continuous tracking, while others may prefer the flexibility to enable or disable the log as needed. Tally offers two product releases to cater to these needs:

TallyPrime Edit Log Release: The Edit Log is always enabled, with no option to disable it.
TallyPrime Release: This version provides the flexibility to enable or disable the Edit Log based on business requirements.

Choosing the Right Version for Your Business

Both TallyPrime Edit Log Release and TallyPrime offer the same features and capabilities, with the only difference being the handling of the Edit Log:

TallyPrime Edit Log Release: Edit Log is enabled by default and cannot be disabled.
TallyPrime: Users can enable or disable the Edit Log as needed.

Which Should You Choose?
If your business requires continuous tracking for better internal controls or to meet statutory obligations, TallyPrime Edit Log Release is the ideal choice. For businesses that need to maintain audit trails for internal purposes or prefer on-demand viewing, TallyPrime offers the necessary flexibility.

Managing the Edit Log in TallyPrime

Managing the Edit Log in TallyPrime is straightforward. If you need continuous tracking, simply download and install TallyPrime Edit Log Release, load your company data, and all edits will be automatically captured.

For those who prefer to manage the Edit Log intermittently, follow these steps: