Background
The Registrar of Companies (ROC), Ahmedabad issued an adjudication order against Topsun Energy Limited for failing to comply with the mandatory audit trail (edit log) requirements in its accounting software.
These requirements were made compulsory under the Companies (Audit and Auditors) Rules, 2014 (as amended), effective 1 April 2023, to ensure transparency of all changes in financial records.
An audit trail is a digital log that captures who made changes, when, and what changes were made — important for compliance and fraud prevention.
What Went Wrong
During internal due diligence and the statutory audit for FY 2023–24, it was discovered that the company’s accounting software did not have an audit-trail/edit-log feature, and this lapse was noted in the auditor’s report.
The company subsequently filed a suo-motu adjudication application acknowledging the default and later upgraded to compliant software.
Penalty Details
ROC Ahmedabad imposed a total penalty of ₹3.5 lakh:
• ₹3,00,000 on Topsun Energy Limited
• ₹50,000 on the Managing Director, Chintan Gandabhai Patel
The default related to the period 1 April 2023 to 31 March 2024, and the penalty was under Section 134(8) of the Companies Act, 2013, with adjudication powers under Section 454.
ROC emphasized that subsequent compliance (installing audit-trail software later) does not cure past defaults.
Key Takeaways
Audit trail compliance is mandatory for all companies using accounting software from FY 2023–24 onwards.
Directors and officers remain personally liable for lapses during the relevant financial year, even if issues are corrected later.
Companies should ensure continuous audit trail logging and proper disclosures in the Board’s Report to avoid penalties.
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