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Unit 12: Special Features of Audit

keep Books of Accounts and Registers in connection with the business of the society in Notes
such form as the Director of Co-operative Audit may from time to time require.

12.5.2 Salient Features Concerning Accounts

Following are the salient features concerning accounts:

(i) 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.
(ii) 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.
(iii) 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).
(iv) 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.

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.

12.5.3 Statutory Provisions relating to Co-operative Audit

Audit of Co-operatives is conducted as per provisions of Section 63(1) of the Karnataka
Co-operative Societies Act, 1959. According to this section:
“Every Co-operative society shall get its accounts audited at least once in each year by the
Director of Co-operative Audit or by a person authorized by him by general or special order in
writing in this behalf.”
Section 63(4) provides that every person who is or who has at any time been, an officer or
employee of the society and every member and past member of the society, shall furnish such

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