AUDIT, ENQUIRY, INSPECTION AND SURCHARGECentral

Section 73 of The Multi-State Co-operative Societies Act, 2002

(1)Every auditor of a multi-State co-operative society shall have a right of access at all times to the books, accounts and vouchers of the multi-State co-operative society, whether kept at the head office of the multi-State co-operative society or elsewhere, and shall be entitled to require from the officers or other employees of the multi-State co-operative society such information and explanations as the auditor may think necessary for the performance of his duties as an auditor.
(2)Without prejudice to provisions of sub-section (1), the auditor shall inquire,--
1. (a)whether loans and advances made by the multi-State co-operative society on the basis of security have been properly secured and whether the terms on which they have been made are not prejudicial to the interests of the multi-State co-operative society or its members;
2. (b)whether transactions of the multi-State co-operative society which are represented merely by book entries are not prejudicial to the interests of the multi-State co-operative society;
3. (c)whether personal expenses have been charged to revenue account; and
4. (d)where it is stated in the books and papers of the multi-State co-operative society that any shares have been allotted for cash, whether case has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance-sheet is correct, regular and not misleading.
(3)The auditor shall make a report to the members of the multi-State co-operative society on the accounts examined by him and on every balance-sheet and profit and loss account and on every other document required to be part or annexed to the balance-sheet or profit and loss account, which are laid before the multi-State co-operative society in general meeting during his tenure of office, and the report shall state whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information required by this Act in the manner so required and give a true and fair view,--
1. (a)in the case of the balance-sheet, of the state of the multi-State co-operative society's affairs as at the end of its financial year; and
2. (b)in the case of the profit and loss account, of the profit or loss for its financial year.
(4)The auditors report shall also state--
1. (a)whether he has obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purposes of his audit;
2. (b)whether, in his opinion, proper books of account have been kept by the multi-State cooperative society so far as appears from his examination of those books, and proper returns adequate for the purposes of his audit have been received from branches or offices of the multi-State cooperative society not visited by him;
3. (c)whether the report on the accounts of any branch office audited by a person other than the multi-State co-operative society's auditor has been forwarded to him and how he has dealt with the same in preparing the auditors report;
4. (d)whether the multi-State co-operative society's balance-sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns.
(5)Where any of the matters referred to in clauses (a) and (b) of sub-section (3) or in clauses (a), (b), (c) and (d) of sub-section (4) is answered in the negative or with a qualification, the auditor's report shall state the reason for the answer.

Summary

The auditor has the legal right to access all accounts, books, and vouchers at all times, whether kept at the main office or elsewhere.
The auditor is authorized to demand necessary information and explanations from any officer or employee of the cooperative.
The auditor must carry out specific inquiries, including checking if loans are properly secured, if book entry transactions are harmful, and if personal expenses are wrongly charged to the cooperative.
The auditor must check whether cash was actually received for share allotments and verify that the balance-sheet is not misleading if no cash was received.
The auditor must write an audit report to the members stating whether the accounts show a true and fair view of the cooperative's financial affairs and profits or losses.
The cooperative must adopt the auditing and accounting standards determined by the Central Government, or default to the Institute of Chartered Accountants of India standards.

Practical examples

1Mr. Harish is auditing the Multi-State Fertilizer Cooperative. When he visits a small branch office in Nagpur, the local manager refuses to show him the ledger, so Mr. Harish explains that the law gives him a right of access to all records at all times.

2During the audit, Mr. Harish discovers that the managing director's personal grocery bills were charged to the cooperative's main business expense account, so he flags this in his report as a personal expense charged to the revenue account.

FAQ

1. What access rights does an auditor have under Section 73 of the Multi-State Co-operative Societies Act, 2002?

Under Section 73 of the Multi-State Co-operative Societies Act, 2002, the auditor has a right of access at all times to all books, accounts, and vouchers of the cooperative, wherever they are kept.

2. What must the auditor inquire about regarding loans under Section 73 of the Multi-State Co-operative Societies Act, 2002?

Under Section 73 of the Multi-State Co-operative Societies Act, 2002, the auditor must inquire whether loans and advances made on security are properly secured and if their terms are harmful to the cooperative or its members.

3. To whom is the auditor's report submitted under Section 73 of the Multi-State Co-operative Societies Act, 2002?

Under Section 73 of the Multi-State Co-operative Societies Act, 2002, the auditor must make and present the final audit report directly to the members of the cooperative society.

4. What standard of accounting must a multi-state cooperative bank adopt under Section 73 of the Multi-State Co-operative Societies Act, 2002?

Under Section 73 of the Multi-State Co-operative Societies Act, 2002, cooperative banks must adopt the specific standards of accounting and auditing laid down by the Reserve Bank of India.

Test yourself

Q1.Under Section 73 of The Multi-State Co-operative Societies Act, 2002, which of the following is an auditor legally required to inquire into?

Q2.Under Section 73 of The Multi-State Co-operative Societies Act, 2002, if the auditor answers any of the required reporting matters in the negative or with a qualification, what must the report include?

Q3.Under Section 73 of The Multi-State Co-operative Societies Act, 2002, which organization's standards are the default auditing and accounting standards if the Central Government has not yet specified any?

Q4.Under The Multi-State Co-operative Societies Act, 2002, if a cooperative triggers a concurrent audit under Section 70A, how do the auditor's qualification rules in Section 72 affect the selection?

72PreviousSection 72 Qualifications disqualifications of auditors.74NextSection 74 Signature of audit report, etc.

←Section 72 Section 74→