Introduction

Co-operative societies play a significant role in the socio-economic development of India. These societies are formed by individuals who share common goals and come together to pool their resources for mutual benefit. To ensure transparency and accountability in the functioning of these societies, the Indian Constitution has provisions for the audit of their accounts.

Article 243ZM: Overview

Article 243ZM of the Indian Constitution empowers the State Legislature to make provisions for the audit of the accounts of co-operative societies. This article falls under Part IXB, which specifically deals with the co-operative societies. It gives the State Governments the authority to regulate and supervise the functioning of these societies.

Objective of Audit

The primary objective of auditing the accounts of co-operative societies is to ensure that they maintain proper financial records and comply with the relevant legal and regulatory requirements. The audit process helps in detecting any irregularities or fraudulent activities, thereby safeguarding the interests of the members and stakeholders of the society.

Types of Audit

There are two types of audits that can be conducted for co-operative societies:

1. Internal Audit

Internal audit is conducted by the society itself or by an independent internal auditor appointed by the society. The purpose of internal audit is to review the financial transactions, internal controls, and compliance with the society's bylaws and regulations. It helps in identifying any weaknesses in the internal control system and suggests measures for improvement.

2. Statutory Audit

Statutory audit is conducted by a qualified external auditor who is appointed by the Registrar of Co-operative Societies or as per the provisions of the State Co-operative Societies Act. The statutory auditor examines the financial statements of the society and expresses an opinion on their fairness and compliance with the applicable laws and accounting standards.

Role of Auditor

The auditor plays a crucial role in the audit process of co-operative societies. Their responsibilities include:

1. Examination of Financial Records

The auditor thoroughly examines the financial records of the society, including the cash books, ledgers, bank statements, and vouchers. They verify the accuracy and completeness of the transactions and ensure that the financial statements present a true and fair view of the society's financial position.

2. Verification of Assets and Liabilities

The auditor verifies the existence and valuation of the society's assets and liabilities. They conduct physical verification of assets such as land, buildings, machinery, and inventory. They also review the outstanding loans, liabilities, and provisions made by the society.

3. Compliance with Laws and Regulations

The auditor ensures that the co-operative society complies with the provisions of the State Co-operative Societies Act, the society's bylaws, and other applicable laws and regulations. They examine whether the society has obtained the necessary approvals and permissions, and whether it has followed the prescribed procedures for various transactions.

4. Reporting

Based on their examination, the auditor prepares an audit report that includes their findings, observations, and recommendations. The report is submitted to the society's management, the Registrar of Co-operative Societies, and other relevant authorities. The audit report helps in identifying areas of improvement and facilitates decision-making by the society's management and regulatory authorities.

Consequences of Non-Compliance

Non-compliance with the audit requirements can have serious consequences for co-operative societies. It can lead to legal penalties, loss of credibility, and even dissolution of the society. Therefore, it is essential for societies to ensure that they comply with the audit provisions and maintain proper financial records.

Conclusion

Article 243ZM of the Indian Constitution provides a framework for the audit of accounts of co-operative societies. The audit process helps in ensuring transparency, accountability, and good governance in the functioning of these societies. By maintaining proper financial records and complying with the audit requirements, co-operative societies can build trust among their members and stakeholders, and contribute to the overall development of the country.