Monday, April 13, 2015

Special Points in Audit of Co-operative society

Rights and Duties of the Auditor in case of audit of co-operative society

The auditor of a Co-operative Society has a right to examine the books and vouchers of the business to enable his to satisfy himself whether or not the balance sheet is drawn up, so as to exhibit a true or fair view of the state of affairs of the business, according to the best of his information and explanation given to him. To enable him to perform his duty, the auditor should take the following steps:

1. He should study the Co-operative Societies Act, 1912, and the bye-laws of the society concerned.

2. He should seen that member does not hold more than ten percent of the capital of the society.

3. He should vouch the receipt of cash on account of deposits with the cash book, counterfoils of the receipt book and compare them with the relative accounts.

4. He should vouch the money borrowed from the Central Co-operative Bank with the Cash Book, correspondence and resolution passed by the Managing Committee of the Society to borrow money, the period, the rate of interest , etc.

5. Interest received from borrowers or return of loan from them should be vouched with the agreement entered into between the society and the borrower, regulations of the society, counterfoils of the receipt book, cash book, etc.

6. Loans to the members should be vouched with the agreement, regulations and the resolution passed by the Managing Committee, receipt issued by the member concerned, cash book, etc. If under any circumstance, loan has been granted to a non-member, he should seen whether permission had been obtained from the Registrar of Co-operative Societies for the grant of loan.

7. He should examine the over-due debts, if any.

8. He should vouch the expenses as usual.

9. He should seen that first 25 percent of the profits of the society are carried to the Reserve Fund and ten percent are carried to the Welfare Fund.

10. Cash in hand should be vouched by actually accounting the cash and comparing it with the cash book.

11. Investments should be verified by inspecting them and comparing them with the Investment Account in the ledger.

12. Surplus funds of a co-operative society can be invested only in Government Saving Banks or any other bank which is on the approved list of the Registrar or Co-operative Societies. The auditor should see that the investments are in accordance with the rules.

13. If it is a consumers society, the auditor should check the sales summaries with the sales. He should check the purchases with the order book, the stock book etc. He should verify the stock and examine the method of valuation.

14. He should see that the accounts of the society are prepared according the Co-operative Societies Act and the provisions of the Income Tax Act as applicable to the Co-operative Societies have been followed.

15. The Balance Sheet and Profit and Loss Account are to be drawn up in accordance with the pro forma which is prepared by the chief auditor of Co-operative Societies of the State in which the society is registered, given under Part V, Third Schedule, S. 56 of Banking Regulation Act, 1949.

16. He should satisfy himself whether or not the balance sheet is properly drawn up so as to exhibit a true and fair view of the state of affairs of the business according to the best of his information and explanation given to him.

17. The Registrars of Co-operative Societies of certain States have prescribed a pro forma for drawing up the auditor’s report and the final accounts. The auditor should see that his report, etc. is according to the pro forma.

18. He should see that the Cash Reserve is according to Section 56(i) of Banking Regulation Act.

19. Furniture and Stationery should be physically verified and compared with the Stock Register.

20. He should pay attention to the over-due debts, if any, valuation of assets and liabilities of the Society.


If may be stated here that the audit of co-operative banks is more detailed as compared to commercial banks because the internal check system is not in operation in the case of co-operative.

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