Accounts Notes: AUDIT OF CO-OPERATIVE SOCIETIES

Friday, 25 March 2011

AUDIT OF CO-OPERATIVE SOCIETIES

 Auditor’s objective to see how far the decisions are in line with co-operative principles. Interest of members, provision in respective law of state and provision of bye-laws of society.
 Managing Committee of society does the following :
(i) Custody and maintenance of moveable/un-moveable property.
(ii) Maintenance of account for receipt/payment.
(iii) Summon and attend all meetings.
(iv) Keeping all registers and records required by Act.

Auditor :
 C.A. or diploma holder or having served as auditor in co-operative department of Government.
 Appointment by Registrar and report submitted to him and to society also.
 Audit fee may be w.r.t., working capital at prescribed rates.
 Books of accounts required for :
(i) Sum of money received and expanded.
(ii) All sales and purchases and accounts of st. in hand.
(iii) Assets and liabilities.
Further different books can also be maintained by the society.
 For limited lia. Society, no member other than a registered society can hold share-holding exceeding 20% of shares or Rs.1,000.
 No loan to any person other than member. Special permission to grant loan to another society.
 Accept loan/deposits from members/others subject to bye-laws.
 Investment in :
(i) Central/State Co-operative Bank.
(ii) Approved securities.
(iii) Share security bond, etc. of any other society with limited liability.
(iv) Any co-operative bank if approved by Registrar.
(v) Other money permitted by Central/State Government.
 25% of pt. Transferred to Reserve Fund before distribution to members. Registrar may reduce it but at least 10% is even then required. It may use Reserve fund in Business of a society or may invest or for some public purpose.
 Some State Act provide for compulsory contribution to education fund of state.
 Over due debts for 6 m – 5 yr. and more than 5 years classified and reported upon.
 Overdue interest excluded from interest outstanding in calculation of pt.
 Some Act provide that Bad debts can be written off only if certified as Bad.
 Auditor to see existence, ownership and valuation of asset.
 Special report to registrar for e.g. :
(i) Personal profiteering by members.
(ii) Detection of fraud.
(iii) Mis-management.
(iv) Urban co-operative bank, disproportionate advances to vested interest groups.
(v) Reckless advancing
 Then he provides a class to society. If society is unsatisfied, it may appeal to Registrar and he may direct to review the audit classification.
 Audit Report :
(i) All necessary information and explanation.
(ii) A/c. give all information required by Act.
(iii) P & L true and fair view.
(iv) B/S true and fair view of state of affairs.
(v) Proper Books of Accounts maintained.
(vi) P&L and B/S in agreement with Books of Accounts.
Schedules to the report for :
(i) Transaction contrary to Act, rules and Bye-laws
(ii) Sums not brought into A/c.
(iii) Material/property appearing as doubtful/bad.
(iv) Material irregularity in expenses/realization of money.
(v) Any other matter specified by registrar.
 He may also have to answer two sets of questionnaire called audit memos.
(i) General nature (Applicable to all)
(ii) Practical nature (like for Housing agriculture, etc.)