Auditors ask cos to change software to rule out fraud

Auditors have asked companies using bespoke and standalone accounting software to shift to applications that wouldn’t allow them to change or delete any accounting entries, because auditors are now responsible for any such anomalies.Auditors are required to flag any transaction that is changed, tweaked or deleted by companies they audit as per new regulations applicable from April 1. Auditors will also be responsible for investigating and flagging certain accounting entries where companies may be dealing with related entities or individuals, according to the regulations notified by the Ministry of Corporate Affairs (MCA).Many companies in India tend to delete old accounting entries and insert new ones as they come close to the end of a quarter. While often this is done for technical reasons, many suspect that some companies may be indulging in manipulating financial statements.81809951The government has said that from April, companies can only use an accounting system which has the feature of an audit trail that records all the changes done. This would mean that no accounting entry should be deleted and only a rectification entry can be passed with an explanation.“Most large companies that work on ERP systems do have controls whereby they can make sure that an audit trail of accounting entries and a log is available (to check if they made any correction),” said Sudhir Soni, partner at SR Batliboi, an audit firm. “The challenges may be on standalone or bespoke applications and for medium and small companies that may be using software without such features enabled or available. Auditors will need to use technology skills to make sure that companies follow these guidelines,” he said.

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