Co-Operative Society 10 Min Summary | CA Final Audit Notes |

A co-operative society is a business organization with a particular mode of doing business, by pulling together all the means of production co-operatively, elimination of intermediaries and exploitation from outside forces.

Audit of  Co-Operative Societies ( Sec 17):

  • The Registrar shall audit or authorize some other person to Audit.
  • The audit shall include an examination of overdue debts and a valuation of the assets and liabilities of the society.
  • The Auditor shall at all times have access to all the books, accounts, papers, and securities of society.

Imp Points relating to the Audit:

1. A CA is qualified as an Auditor. But, few State Co-operative societies have permitted only persons holding a government diploma, or who has served as an auditor in the co-operative department of a government to act as an auditor.
2. An auditor of a co-operative society is appointed by the Registrar of Co-operative Societies.
3.  No member of a society other than a registered society can hold share capital of the society was exceeding 20% or Rs.1,000 as Share Value.
4. A Society shall not make a loan to any person other than a Member. However, with the special sanction of the Registrar, a registered society may make a loan to another registered society.
5. A Society can accept loans and deposits from persons who are not members.
6. A society may invest its funds in
  • Central or State Co-operative Bank
  • Securities specified in section 20 of the Indian Trusts Act 1882
  • In the shares, securities, bonds or debentures of any other society with limited liability
  • In any co-operative bank, other than a Central or State co-operative bank, as approved by the Registrar on specified terms and conditions .
7. A prescribed percentage of the profits should be transferred to Reserve Fund, before distribution as dividends or bonus to members.
8. A Society may, with the sanction of the Registrar, contribute an amount not exceeding ten%of the net profits to Charities.

Special Features of Co-Operative Audit

  • Examination of overdue debts
  • Overdue Interest
  • Certification of Bad Debts
  • Valuation of Assets and Liabilities
  • Adherence to Co-operative Principles
  • Observations of the Provisions of the Act and Rules
  • Verification of Members Register and examination of their pass books
  • Reporting irregularities to the Registrar

Auditors of Multi-State Co-operative Society:

The following persons are not eligible for appointed as auditors of a Multi-State Cooperative society:
  • A body corporate.
  • An officer or employee
  • a member
  • A person who is indebted to the Multi-State Co-operative society
# First auditor or auditors of a Multi-State co-operative society shall be appointed by the Board within one month of the date of registration.
#The subsequent auditor or auditors are appointed by Multi-State co-operative society, at each annual general meeting.

Power of Central Government to Direct Special Audit

CG can order for a Special Audit, Where the Central Government is of the opinion that:
  • Affairs Not Managed in Accordance With Prudent Commercial Practices
  • Managed as it would Cause Injury to Interest of Trade or Industry or Business
  • Financial Position is such as would endanger its Insolvency.
#CG shall order for special audit only if that Government or the State Government either by itself or both hold fifty-one percent or more of the paid-up share capital in such Multi-State co-operative society

Inquiry & Inspection by Central Registrar

The Central Registrar may hold an inquiry or Inspection, on a request from
  • a federal co-operative to which a Multi-State Co-operative society is affiliated or
  • a creditor or not less than one-third of the members of the board or
  • not less than one-fifth of the total number of members of a Multi-state co-operative society.

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