Audit of Society

By: Priyanka Jain - 24th February, 2021

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Everyone who belongs to the taxation stream will agree that this is the most wonderful time of the year! Yes, the holiday season. But we all will also agree with the fact that this time the holiday period is quite a short one due to the deadlines having been extended. Once the financial year ends the time for conducting statutory audits of various entities begins. So, what exactly does audit mean? Why are they conducted?

An audit is an independent examination of the financial statements of an entity, which is conducted by an external third party; who will form an opinion on the financial statements in an unbiased manner, to enhance the confidence of the users of the financial statements,which in turn will add value/worthto those statements.

Co-operative society is a voluntary association which works with aim of providing services to its members. It can be referred to as a form of business wherein people belonging to the same class join their hands to meet the common goals like common economic, social and cultural goals.

Why Audit of Co-operative Societies is required?

Audit of societies is conducted to vouch and verify the assets and liabilities along with checking the arithmetical accuracy of the books of accounts of the society. This is something which is looked into while conducting the audit of any entity. One of the main motives of conducting the audit of a society is to examine the Overdue Debts and Overdue Interest.

  • Examination of Overdue Debts:
    The auditor is required to examine and classify the debts into two:
    1. Overdue from six months to five years and,
    2. Overdue above five years and report the same in his/her audit report.
  • Overdue Interest:
    The thing to be kept in mind while conducting audit is to see whether there is interest which is overdue and whether the same is excluded while calculating the profit of the society.
Who can be appointed as an Auditor?

Any person who is a Chartered Accountant or a person who holds a government diploma in Co-operative Accounts or in Cooperation and Accountancy orany person who has already served as an auditor in the Co-operative Society of the State Government and his name is included in the Panel of Certified Auditors maintained by the Registrar and published in the official gazette at least once a year.

Who appoints the Auditor?

The auditor of the Society is appointed by Registrar of the Co-operatives Society. It can be said that the Auditor conducts the audit on behalf of the Registrar. And once the audit is completed he submits the audit report directly to the Registrar.

Rights and Duties of Auditor

The Rights of the Auditor remain the same like the auditor of any other entity i.e. the auditor will have access to all the documents and books of accounts of the society, he/she will have to ensure that the accounts as a whole give true and fair view of the affairs of the societyand he/she is also bound to receive all the information regarding the working of the society.

The Duties of the Auditor are as follows:

  • Since the audit is of a society, the auditor needs to be well versed with the Co-operative Societies Act, 1912.
  • Auditor should physically examine the assets and liabilities of the society.
  • It is the duty of the auditor to prepare the Balance Sheet, Profit and Loss and Auditor's Report in the format specified by the Chief Auditor of the Co-operative Society of the State.
  • Unlike any other auditor, the auditor of society is also required to check the receipts and payments made, vouch the cash book and bank book, etc.
Which Section covers the Audit of Societies?

Co-operative Societies auditis conducted as per Section 17 of the Co-operative Societies Act, 1912 which states as follows:

  1. The Registrar shall audit or cause to be audited by some person authorised by him by general or special order in writing in this behalf the accounts of every registered society once at least in every year.
  2. The audit under sub-section (1) shall include an examination of overdue debts, if any, and a valuation of the assets and liabilities of the society.
  3. The Registrar, the Collector or any person authorised by general or special order in writing in this behalf by the Registrar shall at all times have access to all the books, accounts, papers and securities of a society, and every officer of the society shall furnish such information in regard to the transactions and working of the society as the person making such inspection may require.

Proforma of Auditor's Report

An Illustrative Format of Report of the Auditor of Co-operative Society
INDEPENDENT AUDITOR'S REPORT

To

The Chairman/Secretary/Chief Executive Officer

The __________ Cooperative Society Ltd,

Address,

City Name

Ref.:-Appointment Letter Reference No._______ Dated_______

Report on the Financial Statements as a Statutory Audit

1. We have audited the accompanying financial statements of The __________ Cooperative Society Ltd., which comprise the Balance Sheet as at 31st March 20XX and the Statement of Profit and Loss / Income & Expenditure for the year ended, and a summary of significant accounting policies and other explanatory information incorporated in these financial statements of the Society along withits Branches audited by us for the period 1st April 20XX to 31st March 20XX.

Management's Responsibility for the Financial Statements

2. Management is responsible for the preparation of these financial statements in accordance with Maharashtra Co-operative Societies Act, 1960 & Rules there under. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the applicable Standards by The Institute of Chartered Accountants of India and under the MCS Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Society's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

6. In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the notes thereon give the information required as per the Maharashtra Co-operative Societies Act 1960 and the Maharashtra Co-operative Societies Rules 1961, and any other applicable Acts, and or circulars issued by the Registrar, in the manner so required for the society gives a true and fair view in conformity with the accounting principles generally accepted in India:

  1. in the case of the Balance Sheet, of thestate of affairs of the society as at 31st March 20XX;
  2. in the case of the Statement of profit and loss / Income & Expenditure of the profit/loss for the year ended on that date; and

Report on Other Legal and Regulatory Matters

7. The Balance Sheet and theProfit and Loss Account have been drawn up in accordance with the provisions of the Maharashtra State Co-operative Act.

8. We report that:

a. We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit and have found them to be satisfactory.

b. The transactions of the Society, which have come to our notice, have been within the powers of the Society.

c. The returns received from the offices and branches of the Society have been found adequatefor the purposes of our audit.

9. In our opinion, the Balance Sheet and Profit and Loss / Income & Expenditure Account comply with applicable Accounting Standards.

10. We further report that:

  1. The Balance Sheet and Profit and Loss / Income & Expenditure Account dealt with by this report, are in agreement with the books of account and the returns.
  2. In our opinion, proper books of account as required by law have been kept by the Society so far as appears from our examination of these books.
  3. The reports onthe accounts of the branches audited by branch auditors have been dealt with in preparing our report in the manner considered necessary by us.
  4. For the year under audit, the society has been awarded "__" classification.

Signature

(Name of the Member Signing the Audit Report / Name of Auditor)

(Designation)

Membership Number

Firm Registration Number

Place of Signature:

Date of Report:


Proforma Profit and Loss Account and Balance Sheet

In the books of XXX Co-operative Society Ltd.
Profit & Loss Account for the year ended 31.03.20XX

Last Year's Figures (in Rs.) Expenditure This Year's Figures (in Rs.) Last Year's Figures (in Rs.) Income This Year's Figures (in Rs.)
  1. Interest
  1. Paid
  2. Payable
    1. Interest Received
  1. On Loans and Advances
  2. On Investments
 
  2.Bank Charges     2.Dividend Received on Shares  
  3. Salaries and Allowances to Staff     3.Commission  
  4.Contribution to Staff Provident Fund     4.Miscellaneous Income
  1. Share Transfer Fees
  2. Rent
  3. Rebate in Interest
  4. Sale of Forms
  5. Other Items
 
  5.Salary and Allowances of Managing Director     5.Land Income and Expenditure Accounts  
  6.Attendence Fees and Travelling expenses of Directors and Committee Members        
  7.Travelling Expenses of Staff        
  8.Rent, Rates and Taxes        
  9.Postage, Telegram and Telephone charges        
  10.Printing and Stationery        
  11.Audit Fees        
  12.(Contingencies) General Expenses        
  13.Bad Debts written off or Provision made for Bad Debts        
  14.Depreciation on Fixed Assets        
  15.Land Income and Expenditure Account        
  16.Other Items        
  17.Net Profit carried to Balance Sheet        

Balance Sheet as on 31.03.20XX

Last Year's Figures (in Rs.) Liabilities This Year's Figures (in Rs.) Last Year's Figures (in Rs.) Assets This Year's Figures (in Rs.)
  I. Share Capital
Authorised:
Shares of Rs..... each
Subscribed:
Shares of Rs..... each
Less: Calls in arrears
Add: Calls in advance
    I. Cash and Bank Balances
  1. Cash on Hand
  2. Cash in Banks
    1. Current Accounts
    2. Savings Bank Accounts
    3. Call Deposits on Banks
 
  I-A. Subscription towards Shares     II. Investments
  1. Government Securities
  2. Other Trustee Securities
  3. Non-trustee Securities
  4. Shares of other Co-operative Societies
  5. Shares, Debentures or Bonds of companies registered under the Companies Act
  6. Fixed Deposits
 
  II. Reserve Funds and Other Funds
  1. Statutory Reserve Funds
  2. Building Funds
  3. Special Development Fund
  4. Bad and Doubtful Debts Reserve
  5. Investment Depreciation Fund
  6. Dividend Equalisation Fund
  7. Bonus Equalisation Fund
  8. Reserve for Overdue Interest
  9. Other Funds
    III.
  1. Investment to Staff Provident Fund
  2. Advances against Staff Provident Fund
 
  III. Staff Provident Fund     IV. Loans and Advances
    1. Loans
    2. Overdrafts
    3. Cash Credits
      1. against pledge of goods
      2. clean
  1. Loans due by Managing Committee Members Rs. ...
    Loans due by Secretary and other employees Rs.....
 
  IV. Secured Loans
  1. Debentures
  2. Loans, Overdrafts and Cash Credits from Banks
  3. Loans from Government
  4. Other Secured Loans
    V. Sundry Debtors
  1. Credit Sales
  2. Advances
  3. Others
 
  V. Unsecured Loans
  1. Loans, Overdrafts and Cash Credits from Central Banks
  2. From Government
  3. From Others
  4. Bills Payable
    VI. Current Assets
  1. Stores and Spare Parts
  2. Loose Tools
  3. Stock-in-trade
  4. Works-in-progress
 
  VI. Deposits
  1. Fixed Deposits
  2. Recurring Deposits
  3. Thrift or Saving Deposits
  4. Current Deposits
  5. Deposits at call
  6. Other Deposits
  7. Credit balance in Cash credit and Overdraft Accounts
    VII. Fixed Assets
  1. Land Building
  2. Leaseholds
  3. Railway Siding
  4. Plants and Machinery
  5. Loose Tools, Tackles and Other Equipment
  6. Dead stock
  7. Furniture and Fittings
  8. Livestock
  9. Vehicles
 
  VII. Current Liabilities and Provisions
  1. Sundry Creditors
  2. Outstanding Creditors:
    1. For Purchases
    2. For Expenses including salaries of staff, rent, taxes, etc.
  3. Advance, recoveries for the portion for which value has still to be given, unexpired subscription, premiums, commission, etc.
    VIII. Miscellaneous Expenses and Losses
  1. Goodwill
  2. Preliminary Expenses
  3. Expenses connected with the issue of shares and debentures, including underwriting charges, brokerage, etc.
  4. Deferred Revenue Expenditure
 
  VIII. Unpaid Dividends     IX. Other Items
  1. Prepaid Expenses
  2. Interest accrued but not due
  3. Other Items (to be specified)
 
  IX. Interest accrued due but not paid     X. Profit & Loss Account
Accumulated losses not written off from the reserve or nay other fund
 
  X. Other Liabilities (to be specified)     XI. Current Losses  
  XI. Profit & Loss Account
Profit for last year
Less: Appropriations
Add: Current Profits
       

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