Companies (Accounts) Amendment Rules, 2021

MCA has vide its notification dated 24.03.2021 (Companies (Accounts) Amendment Rules, 2021) notifies that for the financial year commencing on or after the 1st day of April, 2021, every company which uses accounting software for maintaining its books of account, 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.

The analysis of pre and post amendment of the notification dated 24.03.2021 is as follows:

S. No. Rule Pre-Amendment Post Amendment
1 Rule 3(1) of Companies (Accounts) Rules, 2014:

Manner  of books  of accounts to be kept  in electronic mode

The books of account and other relevant books and papers  maintained in
electronic mode shall remain accessible in India so as to be usable for subsequent reference.
The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India so as to be usable for subsequent reference

Provided that for the financial year commencing on or after the 1st day of April, 2021, every company which uses accounting software for maintaining its books of account, 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

2 Rule 8(5) of Companies (Accounts) Rules, 2014: Matters to be included in Board’s Report  In Rule 8(5) of the Companies (Accounts) Rules, 2014, ten matters/clauses were specified which the Board report shall contain in addition to the information and details specified in sub- rule (4). Two additional clauses has been inserted in Rule 8(5) of the Companies (Accounts) Rules, 2014, w.e.f. 01.04.2021 which are as follows:

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 difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.

Accordingly, w.e.f. 01.04.2021, Rule 3(1) of Companies (Accounts) Rules, 2014 for using accounting software having feature of audit trail is applicable to all companies irrespective of its capital or turnover.

Further, two more matters are specified in sub rule 5 of rule 8 which shall be contained in Board report in addition to the details required sub rule (5) and (4) of Rule 8.

Source- ICAI

MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION

New Delhi, the 24th March 2021

G.S.R. 205(E).—In exercise of the powers conferred by section 134 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Accounts) Rules, 2014, namely:-

1. Short title and commencement.- (1) These rules may be called the Companies (Accounts) Amendment Rules, 2021.

(2) They shall come into force with effect from the 1st day of April, 2021.

2. In the Companies (Accounts) Rules, 2014,-

(1) in rule 3, in sub-rule (1), the following proviso shall be inserted, namely:-

“Provided that for the financial year commencing on or after the 1st day of April, 2021, every company which uses accounting software for maintaining its books of account, 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.”

(2) 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 alongwith their status as at the end of the financial year.

(xii) the details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.”

[F. No. 1/19/2013-CL-V-Part III]
K.V.R. MURTY, Jt. Secy.

Note: The principal notification was published in the Gazette of India vide notification number G.S.R. 239(E), dated 31st March, 2014 and was last amended vide notification number G.S.R. 60 (E), dated the 30th January, 2020.

Also Read-

Title Notification No. Date
MCA broaden scope of reporting by Auditors in Audit report G.S.R. 206(E) 24/03/2021
MCA notifies amendment in section 124 & 247 of Companies Act, 2013 S.O. 1303(E) 24/03/2021

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8 Comments

  1. Anant Shrivastava says:

    Is it OS and DB level Audit Trail also need to be enabled in Server or only enabled for Accounting/ERP/Invoicing module software ?
    Please help to clarify on this

  2. Ravichandran MS says:

    Thought this will be technically possible to enable audit trial for all the transactions, it will NOT BE PRACTICALLY FEASIBLE considering the resource overload that will be created because of enabling the audit trial. Government must make it more specific and clear about what all transactions that has to be covered. Also, it cannot be that it should be able to disable the feature, because it will be techincally not possible. Anything can be done if the backend database access .

  3. Ravichandran MS says:

    Thought this will be technically possible to enable audit trial for all the transactions, it will NOT BE PRACTICALLY FEASIBLE considering the resource overload that will be created because of enabling the audit trial. Government must make it more specific and clear about what all transactions that has to be covered. Also, it cannot be that it should be able to disable the feature, because it will be techincally not possible. Anything can be done if the backend database access is available.

    Government must rely on the GSTN/ NIC server transaction more which is in there control.

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