Appearance
Illustrative Wordings for Reporting
Illustrative reporting in case of Standalone Financial Statements
- Based on our examination which included test checks, the company has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with. [Additionally, the audit trail has been preserved by the company as per the statutory requirements for record retention.]4
Illustrative reporting in case of Consolidated Financial Statements :
Unmodified reporting
- Based on our examination which included test checks and that performed by the respective auditors of the subsidiaries, associates and joint ventures/joint operations which are companies incorporated in India whose financial statements have been audited under the Act, the company, subsidiaries, associates and joint ventures/joint operations have used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with. Additionally, the audit trail has been preserved by the company as per the statutory requirements for record retention
Modified reporting
- Based on our examination, which included test checks, and that performed by the respective auditors of the subsidiaries, associates and joint ventures/joint operations which are companies incorporated in India whose financial statements have been audited under the Act, except for the instances mentioned below, the company, subsidiaries, associates and joint ventures/joint operations have used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit, we and respective auditors of the above referred subsidiaries, associates and joint ventures/joint operations did not come across any instance of audit trail feature being tampered with. Additionally, the audit trail has been preserved by the Holding Company and above referred subsidiaries, associates and joint ventures/joint operations as per the statutory requirements for record retention
| Instances of accounting software for maintaining its books of account which did not had a feature of recording audit trail (edit log) facility and the same was not operated throughout the year for all relevant transactions recorded in the software | No of instances without mentioning name of the components. Example “In respect of […] of subsidiaries” |
| Instances of audit trail feature being tampered with | |
| Instances of non-preservation of the audit trail |
In respect of financial year 2022-23, where management has not been mandated to use the accounting software with requisite audit trail facility, the reporting against this clause can be as illustrated below:
As proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the company only w.e.f. April 1, 2023, reporting under this clause is not applicable.
Illustrative wordings for modified reporting
- It may be noted that the reporting under this Rule requires factual reporting. In case a company has exceptions in complying to Account Rules, the auditor may use the language as given in examples below. Examples of such circumstances where exceptions would need to be reported.
| Nature of exception | Illustrative wordings |
|---|---|
| 1. Audit trail feature was disabled for one of the books of account/records or for an accounting software -(e.g., fixed asset software did not have audit trail) | “Based on our examination, the company, has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility except in respect of maintenance of fixed asset records wherein the accounting software did not have the audit trail feature enabled throughout the year. Further, the audit trail facility has been operating throughout the year for all relevant transactions recorded in the software except for the instances reported below…... Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with.. |
| 2. Audit Trail feature is not operating effectively during the reporting period | “………except that the audit trail feature of YYY software used by the company to maintain payroll records did not operate throughout the year…..” “…..except that no audit trail enabled at the database level for accounting software AAA (database SQL) and BBB (database db2) to log any direct data changes………” |
| 3. Accounting software is maintained by third party and auditor is unable to assess whether audit trail feature can be disabled during the reporting period | “Based on our examination, the company, has used an accounting software ABC which is operated by a third party software service provider, for maintaining its books of account and in absence of [state the type of control report] we are unable to comment whether audit trail feature of the said software was enabled and operated throughout the year for all relevant transactions recorded in the software or whether there were any instances of the audit trail feature been tampered with.” |
| 4. The audit trail has not been preserved by the company as per the statutory requirements for record retention. | “……….the audit trail has not been preserved by the company as per the statutory requirements for record retention” Note: This illustration is relevant from 2nd year of reporting and onwards |
| 5. Migration from one software to the other happened during the year or higher version of software installed and auditor is unable to obtain sufficient and appropriate evidence | The Company has migrated to [name of the software] from [old software/manual] during the year and is in the process of establishing necessary controls and documentations regarding audit trail. Consequently, we are unable to comment on audit trail feature of the said software. |
Where the feature of audit trail has not operated throughout the year, the auditor would need to appropriately modify the comment while reporting under this clause and evaluate implication on the Other Legal and Regulatory reporting requirements, and the main audit opinion issued under SA 700, “Forming an Opinion and Reporting on Financial Statements”.