Page 272 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes

Notes Such examination should not be confined to a mere arithmetical check of the books
of accounts. It should go beyond the books of accounts to ensure that the transactions
recorded therein are genuine, properly authorized and correctly entered.

13.2.4 Need for Co-operative Audit

Co-operative Audit serves the following purposes:-
1. The members of the Society are to be satisfied that the affairs of the society are managed
properly and on sound business principles. This is possible by the Co-operative Auditor
undertaking a detailed check of the voluminous transactions taking place during the
entire year and making a report of his findings as a result of this check, to the members.
2. A large number of societies borrow funds from outside. The creditors would be keen to
satisfy themselves of the financial soundness and credit worthiness of the society. For this
purpose they would depend upon the Co-operative Auditor’s report.
3. A large number of persons are employed by Co-operatives for managing their affairs. In
order to ensure that there is proper check on efficiency and integrity of employees, the
managements would require a systematic and thorough check of their accounts. This
purpose is served by Co-operative Audit.
4. Non-members who deposit their funds with the Co-operative Banks would like to satisfy
themselves that their funds are safe with the Bank, This is possible by the Co-operative
Auditor’s report.
13.2.5 Salient Features of Co-operative Audit

The audit of a Co-operative Society is different from that of a joint stock company because the
objects of a Co-operative Society are quite different from those of a Joint Stock Company. While
the main object of a Joint Stock Company is to earn profit, the object of a Co-operative Society
is to render service to its members. Service rather than profit is the motto of a Co-operative
Society Opinions has been expressed from time to time on the nature, extent and scope of
Co-operative Audit.
According to the Maclagan Committee, Co-operative Audit extends somewhat beyond the bare
requirements of the Act and should embrace an enquiry into all the circumstances which
determine the general position of the society. It is the duty of the Co-operative Auditor to notice
any instance in which the Act, rules or byelaws have been infringed, to verify the cash balance
and certify the correctness of the accounts, to ascertain that loans are made fairly for proper
periods and objects and on adequate security to examine repayments in order to check book
adjustments and improper extensions and generally to see that the society is working on sound
lines and that the committee, the officers and the ordinary members understand their duties and
responsibilities.

According to the Mirdha Committee, Co-operative Audit should include scrutiny of the extent
of benefit accruing to the weaker sections of the society’s members. Thus a Co-operative Auditor
should not confine his enquiry to the books of accounts but should go beyond the books and
make enquiries into the working and general functioning of the society. His enquiry according to
the Maclagan Committee should embrace all circumstances which determine the general position
of the society and should aim at seeing that the society is working on sound lines. The audit of
Co-operative Society has to be conducted specially in the background of Co-operative Principles

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