MCA yet again defers mandatory audit trail norm by another year – The Hindu BusinessLine

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Tax forms, close up

Tax forms, close up | Photo Credit: FabrikaCr

In a breather for small and medium-sized companies, the Corporate Affairs Ministry (MCA) has once again deferred by one year the implementation of its rule that required companies to use only accounting software having ‘audit trail’ features.

Now, this implementation is being mandated for transactions put through for financial year beginning April 1, 2023, instead of earlier specified date of April 1, 2022.

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 are equipped with audit trail features in their existing ERP software.


It maybe recalled that MCA had on March 24, 2021 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, 2021. This implementation was later deferred to April 1, 2022 and now again deferred to April 1, 2023.

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.

Pritika Kumar, Founder – Cornellia Chambers, a law firm, said the latest extension will help companies, especially small-scale companies, make this shift thereby decreasing compliance burdens and costs.

Shoubhik Dasgupta, Partner, Pioneer Legal, said the requirement for accounting software of every company to record the entire audit trail and every change to the books is now going to be applicable from April 1, 2023. “It will take much longer before every company big and small will be in a position to adopt accounting software such as this. Some will also be hesitant to do so given the recording of every change made to the books of accounts introduces an element of transparency which would make some businesses uncomfortable,” Dasgupta said.


Meanwhile, the MCA has deferred by two months — till May 31 — the deadline for furnishing the 11-page CSR form CSR-2 in respect of information related to FY 2020-21. The MCA had earlier set deadline of March 31, but now extended it to May 31. FormCSR-2 had been mandated to give the government a comprehensive picture of the CSR funds spent and activities carried out.

Kumar said that this extension will give the companies time to comply with the requirement more meaningfully.

Moin Ladha, Partner, Khaitan & Co, said, “While both the requirements to maintain audit trail and filing of CSR report are critical.

The extensions for both compliances will ease the pressure for companies which was created due to the pandemic related restrictions”

“The latest extension will help companies, especially small-scale companies, make this shift thereby decreasing compliance burdens and costs.”

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