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Unit 13: Audit of Banking and Insurance Company

13.2.10 Objectives of Co-operative Audit Notes

1. Verification of the accuracy of the books of accounts and ascertaining correctness of accounts.
2. Detection of clerical errors and errors of principles and prevention of such errors.
3. Detection and prevention of frauds.

4. Examination of the affairs of the society in order to ascertain whether they have been
carried on in accordance with the provisions of the Co-operative Law and the Principles of
Co-operation and on sound business principles.
5. (a) Assessment of the extent to which the conditions of the members, particularly their
economic conditions, have improved by the operations of the society.
(b) Certification of actual profit realized or loss incurred.

13.2.11 Main Aspects of Co-operative Audit

There are two main aspects: firstly, Co-operative Audit is an audit conducted under the statute
and therefore, it is statutory in character and, secondly, it is undertaken by Government and it is
therefore, state controlled audit.
State, today, is a major partner in a majority of Co-operative undertakings and the state has
acknowledged the agency of Co-operatives as an instrument of economic growth. The State as
such, takes active part in the administration and management of Co-operatives. It is therefore
vitally interested in getting the accounts of Co-operative Society audited regularly. The success
of Co-operative movement depends on proper management of Societies. There are chances of
the funds of the societies being mismanaged if the relevant transactions are not properly and
promptly checked and prompt follow-up action taken on the findings of Audit. Control
exercised through audit thus serves a very valuable purpose and enables effective weeding out
of the unscrupulous and undesirable elements from the Co-operative movement.

The audit of Co-operative Societies which is compulsory under the Act has been entrusted to the
Director of Co-operative Audit. This statutory requirement ensures proper management of
operatives which are public organizations.

13.2.12 Duties, Responsibilities and Powers of Co-operative Auditor

The main duties and responsibilities are the following:
1. It is the duty of the auditor to verify the cash balance and securities, examine the overdue
debts, if any, value assets and liabilities of the society, verify balances at the credit of the
depositors and creditors and the amount due by the society’s debtors (Section 63(2) of the
KCS Act read with rule 29(1) of the KCS Rules).
2. The Auditor should satisfy himself that the Co-operative Society has kept all account
books and registers in connection with the business of the society as required by the
Director of Co-operative Audit, properly and up-to-date (rule 51 of the KCS Rules).
3. The accounts have been prepared by the Co-operative Society for each separate year in
such form as specified by the Director of Co-operative Audit (Rule 53(1) of the KCS Rules).
4. Verify whether the provisions of all the bylaws have been strictly observed and the
bylaws are in accordance with the provisions of the Act and Rules framed there under.

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