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Entries in accounting software can be changed or deleted without a record, so the reasons for later mismatches cannot be traced.
An audit trail logs user, date and time, action, and old and new values for every entry; since 1 April 2023 companies must keep it switched on for the whole year.
Enable the edit log in Tally, Zoho Books or the ERP, restrict who can alter or delete vouchers, and preserve the logs with the books.
A per-voucher history the auditor can test, linking each change to a user and time, and explaining differences that show up in reconciliation.
An audit trail is an automatic log of who created, changed or deleted each accounting entry, and when. It is often called an edit log. Since 1 April 2023, every Indian company must keep its books in accounting software that records this audit trail for every transaction, and the feature must not be switched off at any point in the year.
Who has to follow the rule, and how do auditors test that it worked?
The rule comes from an amendment by the Ministry of Corporate Affairs to the Companies (Accounts) Rules. It was first notified in 2021 and, after deferrals, applied from the financial year beginning 1 April 2023, that is FY 2023-24 onwards. It applies to companies that keep books electronically, which today is almost all of them. Proprietors and partnerships are not covered by this company-law rule, though the habit is useful for them too.
The audit trail must be preserved for as long as the books themselves, generally eight years.
The statutory auditor has to report on it. In practice, auditors check:
- Whether the software has an audit trail feature at all.
- Whether it was enabled for every day of the year, not switched on just before the audit.
- Whether it covers all relevant transactions and users, including administrators.
- Whether there are signs it was tampered with.
- Whether the logs have been kept.
TallyPrime (its Edit Log edition), Zoho Books and most ERPs offer this feature. If a company uses older software or Excel-based books, it should discuss the gap with its auditor early.
What an audit trail records, and what it does not
| Records | Does not record |
|---|---|
| User who made the change | Why the change was made |
| Date and time | Who approved it, unless approval is a separate step |
| Action: created, altered, deleted | The supporting document (bill, email, approval note) |
| Old value | Whether the new value is correct |
| New value | Changes made outside the software |
An audit trail is a record, not a judgement. It tells you that a voucher changed, not whether the change was right. That still depends on the narration, the attached document and the reviewer.
Worked example: a payment voucher changed after the event
On 10 April, the accountant records a payment voucher of ₹1,25,000 to a vendor. On 14 April, a different user edits the same voucher to ₹1,52,000.
The edit log shows:
- Voucher: Payment, number 0418
- Created: 10 April, 11:20, by user “accounts1”, amount ₹1,25,000
- Altered: 14 April, 16:05, by user “admin”, amount changed from ₹1,25,000 to ₹1,52,000
At month end, the bank reconciliation shows a ₹27,000 gap (₹1,52,000 less ₹1,25,000): the bank paid ₹1,25,000, but the books now say ₹1,52,000. Without the edit log, someone would have to guess. With it, the reviewer knows exactly who changed the figure and when, and can ask why. Perhaps the digits were swapped while correcting a narration; perhaps the change was deliberate. Either way, the correction is now traceable.
Is an accounting-software audit trail the same as a reconciliation audit trail?
No. They overlap but answer different questions.
- The accounting-software audit trail tracks changes to entries in your books.
- A reconciliation audit trail records how each balance was proved: which bank line matched which entry, who cleared an exception, what evidence was attached and who signed off.
An auditor may ask for both. The first shows that the books were not silently altered. The second shows that the balances in them were checked against outside records. A good habit, which the edit log rule encourages, is to correct mistakes with a new entry rather than editing or deleting the old one.