Record-Keeping and Audit Requirements under the DPDP Act, 2023

Executive Summary

The Digital Personal Data Protection Act, 2023 (DPDP Act in India) places a strong emphasis on documentation, auditability, and accountability. While fiduciaries bear the primary responsibility for lawful processing, their ability to demonstrate compliance depends on maintaining proper records and subjecting themselves to independent audits.

The Act makes record-keeping and audits especially stringent for Significant Data Fiduciaries (SDFs), who must preserve detailed logs, undergo periodic audits, and document DPIAs. For other fiduciaries, record-keeping ensures traceability of consent, retention, breach management, and grievance handling.

Introduction: Documentation as the Backbone of Compliance

The DPDP Act rests on three compliance pillars: lawful processing, accountability, and enforcement. Documentation underpins all three. Without reliable records, fiduciaries cannot:

• Prove that valid consent was obtained.
• Demonstrate lawful refusal of erasure (e.g., RBI retention rules).
• Show that breaches were promptly notified.

Audits provide an independent check, preventing fiduciaries from reducing compliance to a box-ticking exercise.

Statutory Record-Keeping Obligations

The DPDP Act requires fiduciaries to maintain records demonstrating compliance with:

1. Consent Management: Logs of consent obtained, modified, or withdrawn.
2. Processing Activities: Categories of data, purposes, lawful basis.
3. Data Retention: Retention schedules and erasure actions.
4. Data Principal Requests: Access, correction, erasure, nomination requests.
5. Breach Notifications: Records of breaches, notifications to Board and Data Principals.
6. Cross-Border Transfers: Documentation of transfers, government notifications relied upon.
7. Grievance Redressal: Logs of complaints and resolutions.

For SDFs, additional records include:

• Data Protection Impact Assessments (DPIAs).
• Audit Reports.
• DPO Opinions and Decisions.

Audit Requirements under the DPDP Act

1. Applicability: All fiduciaries must maintain records, but SDFs must undergo periodic independent audits.
2. Scope of Audits: Audits typically cover adequacy of security safeguards, accuracy of consent logs, timeliness of grievance handling, breach detection and notification systems, and Cross-border transfer compliance.
3. Independence: Auditors must be independent professionals with expertise in law, technology, or both.
4. Frequency: Rules may prescribe annual audits for SDFs. High-risk sectors may face more frequent audits.

Model Record Categories

Consent Logs

• Identity of Data Principal.
• Date and time of consent.
• Method of consent (opt-in, written, electronic).
• Purpose of processing consented to.
• Withdrawal requests and action taken.

Retention Schedules

• Categories of data retained.
• Legal basis for retention.
• Deletion dates and proof of erasure.

Breach Records

• Date and nature of breach.
• Number of Data Principals affected.
• Timeline of CERT-In and DPB notifications.
• Mitigation measures taken.

Grievance Logs

• Date of complaint.
• Nature of complaint.
• Resolution steps.
• Timeline of closure.

Model Audit Workflow

1. Pre-Audit Preparation

• Fiduciary compiles records and consent logs.
• DPO prepares compliance status report.

2. Audit Planning

• Auditor defines scope: security, DPIAs, grievance handling.

3. On-Site/Remote Audit

• Review of systems, documentation, and staff interviews.

4. Findings and Recommendations

• Non-compliances identified.
• Mitigation strategies recommended.

5. Final Report

• Shared with management and DPO.
• Submitted to DPB if required.

6. Follow-Up

• Implementation of recommendations.
• Periodic re-audit if high risks remain.

Sectoral Applications

Banking and Fintech

• Must align DPDP records with RBI audit trails (KYC, payment data).
• Consent withdrawal logs critical for digital lending apps.

Healthcare and Health-Tech

• Patient consent logs for telemedicine and clinical trials.
• Audit of hospital IT systems for ransomware resilience.

E-Commerce and Retail

• Logs of opt-ins for promotional communications.
• Audit of vendor data-sharing practices.

Telecom and ISPs

• Subscriber consent for KYC and spam preferences.
• Audit of DND registry integration.

IT/ITES and Cloud

• Processor compliance reports for global clients.
• Independent audits as contractual obligations.

Global Comparisons

GDPR (EU)

• Article 30 requires records of processing activities.
• Audits tied to accountability principle.
• Supervisory Authorities may demand access.

Singapore PDPA

• Mandatory record-keeping of data inventory and breach logs.

Brazil LGPD

• Documentation obligations with periodic reporting to the National Authority.

India’s DPDP Act is consistent but places stronger emphasis on independent audits for SDFs.

Compliance Strategies

1. Automated Record Systems: Deploy software to maintain consent and grievance logs.
2. Audit Readiness: Treat audits as continuous processes, not annual disruptions.
3. Templates and Policies: Standardise record formats for uniformity.
4. Integrated Compliance: Align DPDP records with sectoral obligations (RBI, SEBI, IRDAI, TRAI).
5. Board-Level Oversight: Regular reporting to Board and management to ensure accountability.

Risks of Non-Compliance

• Regulatory Penalties: Up to ₹150 crore for SDF failures.
• Adverse Audit Reports: May damage credibility with regulators and clients.
• Operational Risk: Poor records may cripple incident response.
• Reputational Harm: Public perception of weak compliance.

Conclusion & Key Takeaways

The DPDP Act makes record-keeping and audits the backbone of compliance. For fiduciaries, documentation is not optional—it is the primary way to prove compliance. For SDFs, independent audits reinforce accountability and transparency.

Key takeaways:

• Maintain structured records of consent, retention, breaches, grievances, and transfers.
• Treat audits as preventive tools, not punitive events.
• Automate record-keeping wherever possible.
• Sector-specific fiduciaries must align DPDP documentation with sectoral regulator requirements.

In India’s evolving privacy regime, records and audits are the difference between compliance on paper and compliance in practice.

Co–Authored by :- Aurelia Menezes