## Audit of Trusts & Societies
### Legal Framework — Three Forms of Charitable Institutions
| Form | Primary Governing Law |
|---|---|
| Public Trust | State Public Trust Act; if no State Act, then Indian Trusts Act, 1882 |
| Society | Societies Registration Act, 1860 |
| Non-profit Company | Companies Act, 2013 — Section 8 |
Additional applicable laws (regardless of form):
- Income Tax Act, 1961 — tax exemptions on income
- Foreign Contribution (Regulation) Act, 2010 — where foreign contributions are received
---
### Books of Account
Charitable and religious trusts must maintain regular books of account to demonstrate the due discharge of responsibilities. The auditor must report whether the trust has maintained proper books of account, including:
| Required Record |
|---|
| Cash Book |
| Ledger |
| Journal |
| Copies/counterfoils of bills (machine-numbered or serially numbered) issued by the trust |
| Original bills received and receipts for payments made by the trust |
| Any other book necessary for a true and fair view of affairs |
### Financial Statements
Every trust must prepare annual financial statements (Balance Sheet and Income & Expenditure Account). The format is prescribed under the applicable State law.
---
### Audit of Trusts — Specific Checks
The auditor must ascertain:
1. Whether accounts are maintained regularly and in accordance with the applicable Act and rules
2. Whether receipts and disbursements are properly shown and donations are applied as per trust objects and specific donor directions
3. Whether cash balance and vouchers in the custody of the manager/trustee agree with the accounts at the date of audit
4. Whether all books, deeds, accounts, vouchers, and documents required were produced before the auditor
5. Whether a register of movable and immovable properties is maintained and changes reported to the regional office
6. Whether maximum and minimum number of trustees is maintained as per the trust deed
7. Whether meetings are held regularly as required by the trust instrument
8. Whether minute books of meeting proceedings are maintained
9. Whether any trustee has an interest in the trust's investments (conflict of interest)
10. Whether any trustee is a debtor or creditor of the trust
---
### Audit of Societies — Specific Checks
The auditor must ascertain:
1. Governing legislation: Societies Registration Act, 1860 or applicable State law
2. Objects of the society from MoA/bye-laws (charitable, social, cultural, educational)
3. FCRA registration: Whether obtained for receiving foreign contributions
4. Income Tax registration: Whether registered for tax exemption on income
5. Internal controls: Especially over donations and expenditures related to objects
6. Accounting policies: Appropriateness for donations, grants, and specific grants
7. Reimbursed expenses: How expenses reimbursed by donors are recognised in financial statements
8. Registrar inquiries: Whether any inquiry under applicable law is pending — assess implications for audit opinion
9. Irregular/illegal expenditure: All cases of irregular, illegal, or improper expenditure or failure to recover monies or property of the society
10. Breach of trust: Whether irregular expenditure resulted from breach of trust or misapplication by the governing body