## Audit of Co-operative Societies

### What is a Co-operative Society?

A co-operative society is a business organisation where members pool resources co-operatively, eliminate middlemen, and protect themselves from exploitation by external forces. It is a distinct mode of doing business governed by its own statutory framework.

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### Audit under Section 17 — Co-operative Societies Act, 1912

#### 1. Qualifications of the Auditor

Unlike company audits (restricted to Chartered Accountants), some State Co-operative Acts permit additional qualifiers:

Qualifier	Basis
Chartered Accountant	Chartered Accountants Act, 1949
Government diploma holder	Diploma in co-operative accounts OR in co-operation and accountancy
Former government auditor	Person who served as auditor in the co-operative department of a government

This is a significant exception to the general CAs-only rule for statutory audits.

#### 2. Appointment of the Auditor

Appointed by the Registrar of Co-operative Societies — NOT by members at the AGM (as in companies).
Audit fees are paid by the society at the statutory scale of fees prescribed by the Registrar, based on the category of the society — not negotiable.

#### 3. Books, Accounts and Other Records

Under Section 43(h) of the Central Act, a state government can frame rules prescribing the books and accounts to be kept by a co-operative society.

As an example, in Maharashtra, co-operative societies must maintain records covering:

Record Type	Content Required
Receipts & Payments	All money received and expended; nature of each transaction
Sales & Purchases	All goods bought and sold by the society
Assets & Liabilities	Complete statement of assets and liabilities

For large-scale co-operative organisations:

Different subsidiary books and registers are maintained for each function.
Daily summary totals from subsidiary books are transferred to the main Cash Book.

The nature of books required will vary with the nature and object of the society — a credit society will maintain different registers than a consumer or housing society.

Worked example

### Example 1

A state government has enacted its own Co-operative Societies Act. A co-operative credit society approaches a CA firm for audit. On review, the auditor finds the society's managing committee passed a resolution appointing the CA firm. Issue: In co-operative societies, the auditor must be appointed by the Registrar of Co-operative Societies, not by the managing committee or members. A self-appointed auditor lacks statutory authority. The CA firm should refuse to proceed until properly appointed by the Registrar.

### Example 2

During an audit of a co-operative consumer society, the auditor notes that daily cash summaries are posted to the main Cash Book, but several subsidiary purchase registers for the last quarter are missing. Audit response: This constitutes a failure to maintain required records under the State rules framed under Section 43(h) of the Central Act. The auditor should document the deficiency, assess its impact on the completeness of purchases and liabilities recorded, expand substantive testing of payables and expenses, and report the non-compliance in the audit report.

⚠️ Common exam mistakes

Assuming only Chartered Accountants can audit co-operative societies — some State Co-operative Acts also permit government diploma holders or persons who served as auditors in government co-operative departments
Confusing the appointment mechanism — in co-operative societies the auditor is appointed by the Registrar of Co-operative Societies, not elected by members as in companies
Overlooking that audit fees for co-operative societies are fixed on a statutory scale prescribed by the Registrar — they are not freely negotiable between the auditor and the society
Applying a uniform checklist of books across all co-operative societies — the books required vary with the nature and object of each society (credit, consumer, housing, etc.) and are state-specific

Bare-Act text Section 43(h) · Co-operative Societies Act, 1912 · click to expand

a state government can frame rules prescribing the books and accounts to be kept by a co-operative society

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