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Appointment of Auditors of Co-operative Societies :
According to the section 81(1) as it stood prior to amendment of 1985, the Registrar of Co-operative Societies had the power of appointing the auditors for the audit of all Co-operative Societies in Maharashtra State. Now as per the amendment, Section 81(1) has been sub-divided as 81(1)(a) and 81(1)(b). According to Section 81(1)(a) the Registrar has the power to appoint an auditor by an order, only in case of such societies, which have been given financial assistance including guarantee by the State Government , Govt. Undertakings or Financial Institutions from time to time. Section 81(1)(b) of the amendment act provides that the societies other than the societies referred to in clause (a) shall arrange to get their accounts audited, at least once in each co-operative year, by an auditor form the panel of auditors maintained by the Registrar, or by a Chartered Accountant holding a certificate in Co-operative Audit issued by the Institute of Chartered Accountants of India.
Thus on going through the Section 81(1)(b) it seems that a co-operative society not coming with the ambit of Section 81(1)(a) can appoint its own auditors at Annual General Meeting by passing a resolution. Regarding the qualifications of an auditor the Section states that he should be a person, whose name appears on the panel of auditors maintained by the Registrar of Co-operative Societies. Alternatively the section states that the society may appoint a Chartered Accountant holding a certificate in co-operative audit issued by the Institute of Chartered Accountants of India.
It may be stated here that the Institute of Chartered Accountants of India does not issue a certificate for co-operative audit. Every qualified Chartered Accountant is competent to conduct any audit. The fact is that the Western India Regional Council of the Institute of Chartered Accountants of India conducts every year a course – Study Course – in Co-operative Audit, and issues a certificate for having completed the course to a Chartered Accountant whom attends the course. Applications of such Chartered Accountants who have completed the course were being forwarded upto now by the western Indian Regional of the registrar of Co-operative Societies Maharashtra State., On reading Section 81(1)(b) as amended it seems that a Chartered Accountant holding a certificate of completion of course from Western India regional Council could be appointed as an auditor by the Society without his name being enrolled on the Panel.
The Section is further appended by a provision that every third year the accounts of the society shall be audited by the Registrar, through a person authorized by him.
On reading of the Section 81(1)(b) it could be seems that the duration of auditors under this Section is only two years since in the thirds year the register will point in auditor The section is also appended by the a further proviso that the registrar for the reasons recorded in writing may appoint an auditor to audit the accounts of any society at any time.
On ready of these amended section relating to appointment of statutory auditors of co-operative societies it seems that the amendment are not made with full thought . In my opinion, there is no needs for Registrar’s audit at every third year. The Registrar has already wide powers for conducting test audit, special audit and re-audit of societies under the Act. The proviso to the section perhaps may create arrears of co-operative audit, if the audit for the third year is not complete timely by the Registrar’s representative, since the fourth year’s audit cannot be taken up without completing the third year audit. It may further be stated that the term financial situation is not defined under the Act. In my opinion State Financial Coronations, State Co-operative Banks and District Central Co-operative Banks could be considered as Financial institutions, since these are the organisations with a specific object of institutional finance. Societies having loans from such organizations cannot appoint their own auditors. Thus, Section 81(1)(b) is subject to reservations, ultimately leaving the position to status-quo.

Scope of Audit :
(Section 81(2) as amended). This Section give an enlarged inclusive definition of audit over the definition of original Act of 1960. According to old Act it was stated that audit shall include, examination of over due debts if any, the verification of cash balance and securities; and valuation of assets and liabilities of the society. The new definition includes the following additional items :
Whether the loans and advances and debts made by the society on the basis of security have been properly secured, and the terms and conditions of loan are not prejudicial to the Society.
Whether transactions of the Society which are represented merely by book entries are not prejudicial to the interest of society.
Whether the loans and advances made by the society have been shown as deposits.
Whether personal expenses have been charges to revenue A/c.
Whether the Society has properly utilised the financial assistance granted by the Govt. or Governmental undertakings or financial institutions, for the purpose for which such assistance was granted.
Whether the society is properly carrying out is objects and obligations towards members.

On a close reading of these additions to the scope of co-operative audit it seems that some of these additions are parallel to that of Section 227 (1)(a) of the Companies act, 1956. With the increase in scope of audit the duties and responsibilities of Co-operative Auditor have increased. According the Rule No. 69(3) of Maharashtra State Co-operative Societies Audit Rules an auditor has to report to the members in the prescribed format. The rules have not yet changed and as such I am of the opinion that qualifying observations if any to the additional requirements will have to be included in the report.

Cost and performance audit :
A new Section 81(2A) has been introduced, whereby the Registrar can order the cost or performance audit in case of society or societies. Section 81(2B) states that the qualifications of auditor, shall be “a Works Accountant’s Act, 1959. Cost Audit proceed with a proper cost accounting system and cost accounting records. No such cost accounting records have been prescribed for a particular class of societies in the Co-operative Societies Act.

Deputation of flying squad by the registrar :
Section 81(3) of the old Act has now been relettered as 3 (a) and 3(b). section 81(3)(b) is a new addition inserted by the Amendment Act. According to this, the Registrar is given a power to depute a flying squad for the examination of books, records and accounts and verification of cash balance. The report for the purpose of taking further action if necessary.
The Circumstance and objects of flying squad are not stated in the Act and as such it seems that it is purely discretionary power of Registrar, without stating any reasons. Generally the object of deputing a flying squad is the detection of frauds and misappropriations suspected and reported.
The new Amendment Act inserts new Section 5(A) a power to impound the books of accounts and records of the Society is given to the auditor with the previous permission of Registrar. The section states that if in the course of audit of the society, the auditor is satisfied that some books of accounts and record contain any incriminatory evidence against past or present officer, or employees of the society, he may impound the books of accounts and given the receipt, with prior permission of Registrar.
Section 5(B) casts a duty on the auditor of submitting and audit report to the society and Registrar, expressing his opinion on the Profit & Loss Account, and Balance Sheet of the Society. I have already state that new rules have not been framed as yet, and as such the auditor will report in the prescribed form as per the Rule No.69(3) of 1961 Rules.
On completion of audit the auditor shall discuss the report with the member of Managing Committee and may also give his explanatory observation in the General Meeting if he is invited to attend the General Meeting to offer his comments.

38 thoughts on “Appointment of Auditors of Co-operative Societies”
  1. Since last 5 years (from 2003 to 2008) Our Housing society’s committee is not calling statutory auditors for auding the accounts. Please guide and suggest a way of auditing.

  2. AS PER CO-OP ACT IT IS COMPULSORY TO SOCIETY THAT AUDIT THERE ACCOUNT EVERY YEAR FROM PANEL AUDITOR & PASS THAT ACCOUNT IN AGM. IF COMMITTEE NOT DONE THAT MEANS COMMITTEE NOT DOING HIS DUTY. FOR MORE SUGGESTION – SANJAY JADHAV & ASSO.
    93231 33361 / 9222698798 Email-jadhavauditor@gmail.com

  3. What Suresh Can do is to write to the Secretary asking for the reason why the Accounts are not prepared. If no reply is received with in 15 days write to the Registrar. He will call the Meeting.

  4. hello i m vishal londhe  searching for an auditor for co-operative society’s audit 
    is there someone please contact on   9892278108

  5. I am a CA in practive will anyone provide me with the processs of empanelment for audit of co operative socities.

  6. Query – Auditor Mr A has done Statutory Audit for a Non-aided Co-op Society for 31.03.2010 and 31.03.2011. As per Act, after two years the Co-Op Dept will appoint their Auditor. If the Dept has NOT appointed their Statutory Auditor and the Society in the AGM appoints same Auditor (Mr A) to audit for the year ending 31.03.2012. Whether Society can appoint Mr A for third year?

  7. Regiistrar orderss special audit of a coiop society. Can Asst Registrar sign the orders or it has to be signed by the Registrar himself.

  8. Myself has passed GDCA exam and i would like to apply for Panel audit. As i inquired for application then they told that some rules and laws will change in coming budget and then application will come but can u  suggest me how to be apply for Panel Auditor.

  9. Please let me know the list of Statutory auditors for Pune city approved by Sahakar Ayukta on 31st March 2013.Thanks

  10. Please give me a list of Co-operative Housing Auditor’s in Pune. Our society is in Sinhagad Road, Wadgaon Bk., Pune area.

  11. Hi i completed b.com pgdbm mba gdca also have experience of regular & internal audit.want to be govt auditor.

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