By Team MyGate
Accounts Audit of a Co-operative Housing Society
By Team MyGate
The Co-operative Housing society is no doubt an autonomous and self-reliant endeavor. However, once every year, it is subject to the scrutiny of an outside agency to have its financial statements audited. For this purpose, it hires the services of financial experts in accordance with government laws. Annual account audit of every co-operative housing society is mandated by the Constitution of India. The model bye-laws state that it is the responsibility of the Managing Committee to do an Accounts Audit within a period of six months from the closure of the financial year and before the Notice of Annual General Body Meeting.
What is the procedure to conduct an Audits Account?
The first step is to appoint a Statutory Auditor from the panel of Auditors approved by the State Government or an experienced Chartered Accountant who holds a Certificate in Cooperative Audit issued by a recognized authority. However, the chosen Auditor is not allowed to be retained for more than two consecutive years. The selection of the Auditor is to be done by the Managing Committee at a General Body Meeting. At the same time, a society may select an Internal Auditor from within the society/committee (if they find it necessary).
The Auditor has to be financially compensated by the society, thus his fees have to be paid in accordance with the statutory scale of compensation decided by the Registrar with respect to the type of society.
The Secretary of the society is required to furnish all the necessary documents included but not limited to, ledgers, cashbooks, register of members, a record of shares/debentures, minutes book of the society’s meetings, receipts and payments of income and expenditure, financial statements, profit-loss balance sheets, and any other documents needed by the internal as well as Statutory Auditor.
The Auditors checks for:
- Irregularities, misstatements in the accounts of the society
- Specifics of any anomalies, misappropriation of funds, embezzlement, or fraud found in the
- account statements of the society.
The Auditor is also responsible for:
- Studying the financial transactions such as loan, investment, borrowings, lending of the funds by the society and examine the interest paid and received along with the related agreements
- Physically inspecting the assets of the society
- Ensuring the society’s financial dealings are in accordance with the Co-operative Society Act
The Auditor takes stock of the amount defected, investigates how anomalies were caused and prescribes ways to fix the problem. He also highlights the impact of account irregularities (if any) and their impact on the overall financial statement. The audit is presented to the society and forwarded to the Registrar, who then submits it to the State Government every year.
What happens after the Accounts Audit is completed?
After receiving the Audit Reports from the internal and external auditors, the Secretary is required to prepare draft audit rectification reports which include comments, objections, suggestions, corrections, clarifications on the Accounts Audit report and present the rectification report to the Managing Committee for approval in the next general body meeting. The audit rectification has to be completed within three months from the date the Accounts Audit was handed over. The same audit rectification report is submitted to the Registrar and to the members of the society at the Annual General Body Meeting.
If the Managing Committee of the society fails to submit the audit rectification report to the Registrar, it is considered a constitutional offence and is subject to punitive measures. The Registrar maintains a detailed list of all registered co-operative housing societies district-wise and has a record of all societies that have not conducted their Accounts Audit. The Registrar is also responsible for coordinating between the Auditor and the societies to ensure the entire procedure is finished on time.
Why should you conduct an Accounts Audit with due diligence?
As a responsible member of the Managing Committee, you are required to maintain immaculate financial accounts of the society’s income and expenses. The Secretary is responsible for keeping a record of all receipts, bills and expense accounts for the entire year and store them in a secure place for the Accounts Audit.
If any malfeasance, deliberate or unintentional, is found by the Auditor, it affects the financial framework of the entire society and could cause a serious impact on the members’ financial well-being. Not getting your Accounts Audit done efficiently as per the mandated procedure makes your society non-compliant in the eyes of the government, leading to further action, which could be easily avoided with a timely Accounts Audit.
To aid residents of the co-operative society, who are in most cases laymen coming together to create community living and may not be experts in finance and accounting laws, the government has laid down above mentioned directives which are necessary for every society to follow earnestly.