In a move to further tighten the noose on companies, the government has mandated all companies to ensure every transaction is present on their reporting software. By amending regulations for companies, the government has stated that all changes need to be available on their accounting software.
These changes have brought about in the Companies Rules.
"Every company which uses accounting software for maintaining its books of account shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled," read the government's notification.
This notification will be applicable to all companies — big, small and start-ups, say experts.
"Some of these requirements have significant impacts for smaller businesses in case the existing accounting software does not support the requirements," says Prateek Agarwal, Partner, Nangia & Co LLP.
The new regulations also require auditors of companies to manage representations on advances, loans, investments and receiving funds. The auditor will also have to comment on the use of the software to report trails.
Kapil Rana from the Hostbook is of the opinion that for companies that use cloud-based software to keep a tab of all funds that come into the company and flow out, this might not be a major issue. "The major issue will be for companies that still store their data in their desktop and not on the cloud," says Rana.
Also, companies have to declare their investments in cryptocurrency, any relationship with struck-off companies and ageing payments which is the time taken for companies to settle dues to creditors. Earlier, companies needed to only disclose payables and not ageing details.
Companies also have to declare if any cases of insolvency have been filed against the company and also the valuation of the company at the time of one-time settlement and valuation while taking loans from financial institutions.