Page 276 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes 5. Among other things he should verify for example:

(a) In respect of Credit Societies and Banks, whether loans have been sanctioned for
proper objects and periods and on adequate security as per conditions applicable to
grant of such loans to proper persons. He has also to examine the repayments in
order to ascertain book adjustments, improper renewals etc., and examine whether
prompt action has been taken for recovery of dues and over dues.
(b) In respect of marketing societies whether the society has undertaken pooling and
grading before sale of produce of members etc., and
(c) In respect of other societies whether the business of the society has been conducted
according to the Co-operative principles and sound business practices
6. Verify genuineness and adequacy of securities, mortgage and other bonds, adequacy of
provision made for depreciation of assets and other items of expenses including interest
payable on borrowings and deposits.
7. (a) Conduct personal verification of members accounts and examination of their pass
books with a view to preventing manipulation of accounts by dishonest employees
and office bearers.
(b) Verify whether investments of funds made are in accordance with provisions Of
section 58 of K.C.S. Act read with Rule 23 of K.C.S. Rules and borrowings made are
as laid down in Section 59 of the Act read with Rule 25 of the Rules, and loans made
are in accordance with Section 60 of the Act.

8. Verify whether net profit arrived at is in accordance with the provisions of Rule 22 of
K.C.S., Rules and appropriations made out of net profits are in accordance with Section 57
of the K.C.S. Act.

(a) Analyze the reasons for losses incurred by the society and assess after careful
examination, deficiency or loss, if any, arising out of negligence or misconduct on
the part of any employee or member of the committee, or of the society and after
giving due opportunity to the persons whose actions are likely to be adversely
commented upon in the Audit Report to explain why responsibility should not be
fixed on them for the said deficiency or loss.
(b) Certify the balance sheet subject to qualifications if any indicating the state of:
Accounts and Affairs of the society and award audit classification to the societies on
the basis of instructions issued by the Director of Co-operative Audit by other
competition from time to time.
(c) Government have been relying on the Co-operative Sector to a great extent in the
implementation of their schemes for the upliftment of the weaker sections of society.
The schemes include provision of cheap houses, providing credit to farmers,
encouragement to small scale and cottage industry, reduction in and easy availability
of essential consumer goods etc., Audit has a positive role to play in the
implementation of these schemes, by ensuring that the interests of the weaker sections
of the society are taken care of by the management. During audit it should be seen,
for example, that loans are given in right amounts, at right time and for right
purposes, increased profits reach the masses in the form of reduced prices etc.

The above constitute some of the important duties/responsibilities of the Auditor and are, as
such not exhaustive. In general the Auditor’s examination of accounts and affairs of the society
should be such as to enable him to certify that the balance sheet of the society exhibits a true and
fair view of the affairs of the society at the end of the year and the profit or loss for the financial

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