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Unit 12: Special Features of Audit

12.4.3 Audit Empanelment Requirements Notes

Prior to the private sector entry, the appointments of auditors for the four PSU companies were
made by the CAG. In the current scenario where private insurers have begun operating, the
appointment of auditors appears to have come within the ambit of functions of the IRDA, in
terms of the regulations on preparation of financial statements and auditor’s report under the
IRDA Act. Here, the IRDA Act does not make any distinction between Public Sector and Private
Sector Insurance Companies. (However, to what extent the said Regulations notified under the
sanction given under Sec. 114 A of the Insurance Act, which in itself does not specifically state
anything on auditors’ appointment, can overrule the provisions of Companies Act is not clear.)

Accordingly, IRDA has started compiling a panel of Chartered Accountants and for the purpose,
has also prescribed certain exacting parameters for such empanelment. Of course, in such
parameters, the longevity, size etc. of a firm seems to be only given importance rather than the
specialized qualifications in the field or the domain expertise of the partners. This is rather sad.
An industry that is so unique and important cannot be ‘audited’ casually and generally, when
specialization is the order of the day. Realizing the importance of the need to create and develop
‘domain expertise’ in this industry that is all set to take a giant leap in the years to come, our
Institute has newly introduced a specialized post qualification course on insurance and risk
management.
Providing assurance services to the people who are themselves in the business of assuring
others is a serious affair and the responsibility of the members of our profession to provide
comfort (by doing ‘an informed audit’) to the stakeholders, regulator, reinsures, tax authorities
can hardly be overemphasized.

Self Assessment

Fill in the blanks:

11. Co-operative Society shall not make a loan to any person other than a .............................
12. ................. main role is preparation of financial statements and auditor’s report of insurance
companies.

13. .................................. is the actual claims paid less adjustments for reinsurance recoveries on
them and provisions for claims outstanding as on the date of financial reporting.
14. A new concept called ‘Premium Deficiency’ was brought in by IRDA as a measure for
augmenting policyholders’ funds, it mandated that if the sum of expected claims costs,
related expenses etc. exceed the ................. the said excess is to be recognized as Premium
Deficiency.

12.5 Audit of Co-operative Societies

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.

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