Companies that keep books in electronic form are required to use accounting software which has an audit trail of each change, recording the date, the change and the person, which cannot be disabled, and to retain that trail. The requirement has been notified in phases by the Ministry of Corporate Affairs. Non-company assessees are not all under the same rule; tax officers still ask for edit logs.
What ‘cannot be disabled’ means in a shop
If a Tally administrator can turn the log off, and does, the company is not meeting the rule. If everyone uses the same Administrator password, the log will show a name that is not a person. If the data file is replaced with an earlier backup to ‘undo’ a month, the trail is broken. These are the findings. They are not theoretical.
What the auditor does
The statutory auditor’s reporting on audit trail has been specified by ICAI / MCA. The auditor looks at configuration, at whether the trail operated through the year, and at whether it has been preserved. An IT-audit scope that includes this is described under IT audit.