In a big breather for small and medium-sized companies, the Corporate Affairs Ministry (MCA) has deferred by one year, the implementation of its recent rule that required companies to use only accounting software having ‘audit trail’ features from financial year beginning April 1.
The latest MCA deferral move – which came in just a week after its initial announcement on March 24– has largely been prompted by concerns over paucity of time expressed by small and medium sized companies in making this transition, sources said.
In all, companies had only a week from March 24 to make the transition to equip themselves with software that had “audit trail” features and this was felt as a big challenge for them, they said.
In India, it is estimated that nearly 80-85 per cent of the 1.5 million companies are not using accounting software with ‘audit trail’ features embedded in them. However, most of the large companies use audit trail features in their existing ERP software.
It maybe recalled that MCA had on March 24 mandated every company that uses accounting software to maintain its books of accounts to only use software that has the feature to record audit trail of each and every transaction put through after April 1.
Also, companies had been mandated to create edit log of each change made in account books with the proper dates. As per the amendments, companies must ensure that the audit trail is not disabled.
While the intent of this MCA move was good as it is aimed at preventing tampering of books of accounts, and will further strengthen transparency in the recording of accounting entries to ensure true and fair view of books and accounts, the short time span given for its implementation was a sore point, especially for small and mid sized companies. Now that has been taken care by the deferment by one year, sources said.