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Auditing Theory

Notes 2. The financial position of a bank is depended on the condition of assets, loan, investment,
cash balanced and those of its .........................
3. The large PSBs having balance sheet size (assets + liabilities) of above ` .................. can
exercise managerial autonomy in regard to appointment of SBAs from the year 2008-09
onwards.

13.2 Audit of Co-operative Credit Societies & Co-operative Banks

13.2.1 Role of Co-operatives

Co-operatives today, play a prominent role in our economy. From modest beginnings in the
early part of this century they have grown into gigantic enterprises covering virtually all fields
of activity in our everyday life, all over the country. Even though, co-operation is a voluntary
movement of the public at large, there has been considerable state participation in the
development of Co-operative movement in the post-independence period. Apart from forming
part of national planning, the Co-operatives are today, taking an active and constructive role in
the implementation of the 20-Point Program me and in the upliftment of the weaker sections of
the community and the Scheduled Castes and Scheduled Tribes. They cover such diverse areas as
agricultural credit, marketing, processing, storage of agriculture produce, consumer goods, etc.,
The types of Co-operatives like Agricultural Credit Societies, Land Development Banks, Urban
Banks, Marketing and Processing Societies, Sugar Factories, Spinning Mills, Milk supply Societies,
Farming and Irrigation Societies, Weavers Societies, Industrial Societies, Consumers’ Societies,
Labor and Transport Societies, Electric Societies, Housing, Poultry and Printing, etc.
In its initial stages, Co-operation formed a Central subject. The first legislation on this subject
was the Co-operative Credit Societies Act of 1904 based on the report submitted by Sir Fredrik
Nicholson. This Act confined itself only to Primary Credit Societies. In order to bring the
non-credit societies also within its ambit, the Co-operative Societies Act, 1912 was enacted. The
Act of 1912 aimed at formation of Co-operative Societies for the promotion of thrift, self-help
among agriculturist, artisans and persons of limited means. Consequent upon the
recommendations of the Maclagon Committee on Co-operation in 1915, Co-operation became
a transferred subject in 1919 and each state began to enact its own legislation for its co-operatives.
In the post-independence period, in the light of the recommendations of the All India Rural
Credit Survey Report in 1954, a special role was assigned by Government to the Co-operative
movement in the process of national planning. In its enlarged role, the co-operative apart from
its primary role of helping its members, also assumed a larger responsibility of developing
national economy and promoting the objectives embodied in the Constitution. For this purpose
the State accepted and the co-operators conceded the responsibility of imparting strength to
Co-operatives wherever necessary by means of State Assistance and partnership, In 1959 Karnataka
State passed a separate Act entitled “The Karnataka Co-operative Societies Act, 1959” (KCS Act,
1959). The basic principles, however, confirmed to the two parent Central Co-operative Societies
Acts. The first of which was modeled after the Friendly Societies Act, 1793 of England. The 1959
Act has been amended from time to time with a view to accommodating the needs of changing
times and the aspirations of the people. The State Act contains comprehensive provisions for
audit of Co-operative Societies and makes it obligatory for the Director of Co-operative Audit
to audit or cause to be audited the accounts of every society at least once in a year.

13.2.2 Brief Features of the Financial Provisions of the K.C.S. Act

A Co-operative Society which has for its objects the promotion of the economic interests or
general welfare of its members, or of the public, in accordance with Co-operative Principles, or
a Co-operative Society established with the object of facilitating the operations of such a society

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