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Unit 13: Audit of Banking and Insurance Company

may be registered under KCS Act (Section 4). The aims of the society should not be inconsistent Notes
with the principles of social justice, and its byelaws not contrary to the Provisions of the KCS Act
and Rules. It should comply with the requirements of sound business and have reasonable
chance of success before it could be considered for registration (Section 7). Thus a Co-operative
Society is a business organization with a special mode of doing business, in a strictly business
like manner tempered by a high moral purpose of encouraging in its members, habits of honesty,
industry, thrift, prudence, punctuality and mutual help. The liability of a Co-operative Society
may be limited or unlimited subject to the provisions of Section 4 read with Section 5. The
registration of a society shall render it a body corporate by the name under which it is registered
having perpetual succession and a common seal and with power to hold property, enter into
contracts, etc., (Sec.9). The Act provides for compulsory audit by the Director of Co-operative
Audit or a person authorised by him (Sec. 63).

Did u know? Under sub-section (4 A) of Section 63 of the Act every Co-operative Society
shall submit for each Co-operative year, to the Registrar and the Director of Co-operative
Audit, statements showing the receipts and disbursements, Profit and Loss and the Balance
Sheet for the year and such other statements and returns as the Registrar or the Director of
Co-operative Audit may direct. According to Rule 51 of KCS Rules every Society has to
keep Books of Accounts and Registers in connection with the business of the society in
such form as the Director of Co-operative Audit may from time to time require.

13.2.3 Salient Features concerning Accounts

1. Restrictions on Loans: Under Section 60 of the K.C.S. Act a Co-operative Society shall not
make a loan to any person other than a member. With general or special sanction of the
Registrar, however, a co-operative society can make loans to another co-operative society.
A co-operative society may also make a loan to a depositor on the security of his deposit.
2. Restrictions on Borrowings: According to Section 59 of the K.C.S. Act a co-operative
society may accept loans and deposits subject to the restrictions and limits prescribed, or
specified in the bylaws and further within the limit, fixed in Rule 25 of the K.C.S. Rules.
With sanction of State Government, Co-operative societies may also borrow from credit
agencies subject to the limits and conditions prescribed.
3. Investment of Funds: According to Section 58 of the K.C.S. Act a Co-operative society may
invest or deposit its funds (a) in a Government Savings Bank, (b) in any of the securities
specified in Section 20 of the Indian Trust Act, 1882 (c) in the shares or securities of any
other co-operative society or (d) with any Co-operative Bank or with any Scheduled Bank
approved by the Registrar. With special sanction of the Registrar, a co-operative society
may invest its Reserve Fund in its own business or in the construction or purchase of
buildings or lands required for carrying on the objects of the society. (Rule 23).
4. Provident Fund: According to Section 62 of the K.C.S. Act a society may establish a
Provident Fund for the benefit of its employees. Such provident fund cannot be used in its
business or for creating any assets for the society. The provident fund is also not liable for
any attachment or be subject to any other process of any courts or other authority.
Audit or auditing is a critical and intelligent examination of the books of accounts and verification
of correctness of accounts with relevant vouchers and documents in order to ensure that the
entries in the books have been made correctly so as to constitute a true record of the transactions
and that the Profit and Loss account and the Balance Sheet have been properly drawn up so as to
exhibit a true and fair view of the state of affairs of the institution at the end of the year and the
profit or loss for the financial year ended on that date.

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