When you run a business, dealing with transactions that undergo multiple changes can be quite a hassle. If you streamline your process with an audit trail and track every modification made to a transaction, your work becomes a whole lot easier!
With the goal of moving towards a more transparent economy, the Ministry of Corporate Affairs has mandated that, from April 1, 2023, all businesses using accounting software must ensure that the software is equipped with an audit trail feature. This means that every transaction made through the software must be recorded in an audit trail, ensuring that transactions are verified and accurate.
This mandate has been implemented to improve tax compliance, and reduce tax evasions and mismanagement of funds. For this reason, it’s essential that business owners and their employees know how to stay prepared for this new rule, and how they can make the most of it to help their business.
Audit trail: What it is and how it helps
Simply put, an audit trail will show a record of all modifications made to your transactions. It’s proof of your transaction history, right from when the transaction was created to the last change made to it.
With this complete documentation of your transaction’s edit log, displaying the time and date of the change as well as the user who made the change, you’ll be taking one step further towards better and more transparent tax compliance.
The audit trail feature creates reliable documentation of your business activities, improving your efficiency and security. When you can trace the cause of an error, you can spot discrepancies, prevent internal fraud, and identify the person responsible for any changes made to a transaction. You can also easily uncover any missing data surrounding a transaction, instead of having to search across multiple documents. Moreover, you can solidify your business position with accurate financials, thus gaining more trust from investors, and avail loans easier.
Once you get around to scheduling your regular audit, the auditor will go through the records to identify any issues, and then provide a report with their own analysis of your company’s position. With the audit trail feature, your audits are made much simpler for your auditor, as well as for your employees. Auditors can work faster without having to look through multiple documents, and a quick process would lead to lower audit fees, thanks to the reduced amount of work and time spent. This makes the whole process quicker and more cost-effective.
Here’s how you can prepare for the audit mandate:
Ensure that your accounting software is tax compliant and has the audit trail feature implemented, without the option of being disabled or tampered with. It should be able to capture relevant details like the date and time of the change to the document, as well as the identity of the person who made the change.
Look for cloud accounting software that automatically backs up your data and allows you to pre-save items, contact names, and other details before entering them into your invoice or bill. This helps you eliminate the need to edit transactions due to data entry errors, and establish an initial round of scanning before saving or sending the transaction.
Double-check which employees you’ve added as a user to your accounting software. Make sure their access to confidential information is restricted to what’s appropriate for their role, and pick an accounting system that lets you tweak your user permissions.
Keep your staff informed of audit activities, and encourage them to be technically aware and up to date with these transitions.
Review your audit logs regularly to lower the chances of transaction errors.
More than a mandate, keeping track of your transaction history is one of the best practices that you can follow for your business. Just like keeping organized records of your financial documents and regular reconciliation, having an audit trail can help your business to a great extent. With these steps in place and a smart tax-compliant accounting system that helps you manage your finances with ease, you can get your business audit ready in no time.