One of the most important characteristic features of the cooperative
movement in India has been that it is sponsored by the state.
Cooperative movement in Karnataka is also a state sponsored movement.
The State Government has participated in the movement actively by
providing adequate share capital, loans grants and subsidies to the
cooperative institutions, for the upliftment of downtrodden and for the
purpose of bringing social and economic changes in the life of members
of the society in particular and that of common public in general.
Cooperative societies have been established in several
sectors like credit, banking, processing, production, housing,
warehousing, transport and many other spheres related with agriculture
and industries. These co-operatives are being engaged as effective tools
for ensuring equal distribution of state wealth among all sections of
the society by providing them with Government loans, subsidies and
grants. Even common people also have participated in the business of
these societies by investing their hard earned money.
In order to protect the interest of
public funds and to ensure that the administrative and executive
authorities use this fund, in the best interest of the organization,
government is engaging cooperative audit as a main weapon. To put it in
a nut shell the department is functioning not only as a friend,
philosopher and guide to these institutions but also as a watchdog of
public fund as well as the co-operative movement itself.
The audit conducted by the Department
of Cooperative Audit, having a statutory backing, looks beyond the
routine audit, in as much as, it does not restrict itself to the mere
financial verification but also gets into the details of administrative
lapses, deviation by the management from Acts, byelaws and discharge of
responsibilities by the board of Directors and other executive staff.
By virtue of its detailed verification, it stands apart from other
professional auditing. The Karnataka State Cooperative Societies Act
1959 and rules 1960 lay down in detail the scope of cooperative audit.
Sub Section (2) of the Section 63 of the Act specifies
“The audit stipulated Under Subsection (1) shall include an
examination of overdue debts, if any, the verification of cash balance
and securities, a valuation of the assets and liabilities and an
examination of the working and other prescribed particulars of the
Rule 29(1) of the rules 1960 specifies that, audit shall also
include verification of debtors, creditors and depositors balances, an
examination of the transactions of the management and the financial
statements and to certify the profit or loss actually either reached or
The Act also empowers the department with various other aspects. Section
63(3) specifies that the Director of Audit or the person authorized by
him or the person conducting the audit, shall at all times have access
to all books of accounts, documents, papers, securities, cash and other
properties belonging to or in the custody of society and may summon any
person in possession or responsible for the custody of any such books of
accounts, documents, paper securities, cash and other properties to
produce at any public office or at the head quarters of the societies or
any branch office.
IMPORTANT STATUTORY PROVISIONS OF COOPERATIVE SOCIETIES ACT & RULES,
PERTAINING TO AUDIT
The important statutory provisions of Karnataka Cooperative
Societies Act 1959 and Rules 1960 and with reference to audit are as
Section 63(1): Every cooperative society shall gets its accounts audited
at least once in each year by the Director of cooperative audit or by a
person authorized by him.
Section 63(4) (A): Every cooperative society shall for each cooperative
year prepare and furnish financial statement within two months from the
end of the year.
Section 63(10): State Government may, by an order provide for re-audit
on an application by cooperative society or otherwise.
Section 63(11): The Director of Cooperative Audit shall have powers to
reexamine or re-verify the audited accounts of any cooperative
Section 63(12): The auditor shall enquire about the disbursement of
loans and advances, and to ensure that personal expenses have not been
charged to revenue account.
Section 63(13): The auditor shall make a report that he has examined and
the balance sheet, profit and loss account he has verified and
certified, give a true and fair view about the state of affairs of the
Section 63(14): The Auditor shall also to state that he has obtained all
the information and explanation required for the purpose of audit and
the financial statements are in agreement with the books of accounts and
Section 63(15): Incase if the auditor gets negative answers to the some
of the points raised in sub section (13) and (14), he shall state the
reason for the answer.
109: A Cooperative society or an office bearer or member of those
societies willfully making a false return or furnishing false
information or willfully not furnishing any information shall be
Rule 29(2): The statement of accounts as audited, under sub rule (1);
together with modifications if any made therein by the director of
Cooperative Audit shall be final and binding on the society.
30(1): Every Cooperative society shall pay to the State Government audit
cost or audit fee accordance with the scale fixed by the Director of