Due Date extended for reporting in audit report of accounting software

Due Date extended to reporting in audit report regarding accounting software recording audit trail (edit log) facility or not

Disclosure and due date

MCA has earlier mandated that Auditor has to report in his Audit report starting from 01.04.2021 that if the Company is maintaining its books of account in a Accounting Software which has a feature of recording audit trail (edit log) facility or not. This report is now made applicable from 01.04.20222 instead of earlier 01.04.2021. 

Background

The Ministry of Corporate Affairs (MCA), came with a notification on dated 24^th March, 2021 to amend Companies (Audit and Auditors) Rule, 2014 to make financial disclosure more transparent and reliable, as per the amended the disclosures required to be made by the auditor in its Audit Report. 

As Per the notification the rule shall be applicable on each company, form 1^st April 2021. 

The amended rule 11 of Companies (Audit and Auditors) Rule, 2014, omitted the existing clause (d) and inserted three new clauses (e, f, & g) 

The text of new clause are as follows 

 [(e) (i) Whether the management has represented that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(ii) Whether the management has represented, that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(iii) Based on such audit procedures that the auditor has considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.

(f) Whether the dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.

(g)  [Whether the company, in respect of financial years commencing on or after the 1st April, 2021,] has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention.] 

However, on the very first day of applicability of these rules i.e. on 01/04/2021 The Ministry of Corporate Affairs (MCA), come with  the new notification to relax the companies regarding the disclosure of maintaining its books of account in a Accounting Software which has a feature of recording audit trail (edit log) facility or not 

The Ministry of Corporate Affairs (MCA), has extended the time line for one year only and specifically for the clause (g) of rule 11, Companies (Audit and Auditors) Rules, 2014.  Read:   Audit Report on Maintenance of Software with Audit Trail postponed

Now for the words “Whether the company”, the words, figures, and letters “Whether the company, in respect of financial years commencing on or after the 1st April, 2022,” shall be substituted. 

The notification will come into force from April 1, 2021.

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