Government of Karnataka





May you all have a common purpose,
May your hearts to be in unison,
May you all be the same hand,
So that you can do work off, well.

          ** RIGVEDA.

The ancient Indian scripture Rigveda postulates that when the hearts of all the individuals unite together with a common mind and a common goal any work can be carried out with a higher degree of efficiency. Essence of this spirit can be traced even in the meaning of Co-operation which stresses on the principle “ONE FOR ALL; ALL FOR ONE”. When individuals get united together adopting this cooperative percepts; they can help each other in obtaining the social and economic upliftment of their own lives in particular and that of the entire community in general.


Mahatma Gandhi had envisaged that the cooperative movement is a tool for eradication of poverty and Bapu had always strongly felt that his dream concept of "Gramswaraj" will come true through the co-operative movement. Thus it is evident that cooperative movement has to be essentially a national movement, which is the only means to bring revolutionary changes in the social & economic structure of national life. As such, the regular audit of these institutions is an integral obligation of the Government, with a view to ensure that the funds are managed as per accepted norms for the welfare of all their members. It is the first and foremost duty of any civilized government to patronise, nurture & guide this movement in the proper direction.

            In order to fulfill this obligation the Government of Karnataka established the Directorate of Cooperative Audit in the year 1977 conferring all required statutory powers and responsibilities to perform its function like a friend, philosopher and guide to the cooperative societies in particular and the cooperative movement as a whole, in general.

            The Directorate of cooperative audit and its auditors are striving hard to conduct the audit of all cooperative societies in Karnataka as envisaged under section 63 of Karnataka Cooperative Societies Act 1959. The department is headed by a Director at the state level. In each district, a Deputy Director is heading the district level office. At the subdivision level, an Assistant Director is heading the Office and at the Taluka level Senior Auditor is heading the office. Along with this setup, hundreds of Auditors, and other supporting staff are striving hard to reach, audit, and guide all categories of societies, scattered over every nook and corner of the state.

Co-operative Values.

     Co-operatives throughout the world share a set of values that give them their distinctive character.


In co-operatives, people help each other whilst helping themselves by working together for mutual benefit.


       Individuals within co-operatives act responsibly and play a full part in the organization.


A Co-operative will be structured so that members have control over the organization-one member, one vote.


Each member will have equal rights and benefits (according to their contribution)


Members will be treated justly and fairly.


Members will support each other and other co-operatives

Ethical Values

In the tradition of their founders, co-operative members believe in the ethical values of:

·        Honesty

·        Openness

·        Social responsibility

·        Caring for others.


Co-operative principles

         The Co-operative principles are guidelines by which co-operatives put their values into practice.

1st Principle: Voluntary and open Membership

         Co-operatives are voluntary organizations; open to all persons able to use their services and willing to accept responsibilities of membership, without gender, social, racial, political, or religious discrimination.

2nd Principle: Democratic Member Control

        Co-operatives are democratic organizations; controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership.  In Primary co-operatives members have equal voting rights (one member, one vote), and co-operatives at other levels are also organized in a democratic manner.

3rd Principle: Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.

4th Principle: Autonomy and Independence:

Co-operatives are autonomous, self-help organizations controlled by their members.  If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their                        co-operative autonomy.

5th Principle: Education, Training and Information:

Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives. They inform the general public-particularly young people and opinion leaders- about the nature and benefits of co-operation.

6th Principle: Co-operation among Co-operatives

Co-operatives serve their members most effectively and strengthen the                Co-operative Movement by working together through local, national, regional and international structures.

7th Principle: Concern for Community

Co-operatives work for the sustainable development of their communities through policies approved by their members.


           Co-operation of which so much has been said, is something more than a system.  It is a spirit, an attitude of heart and mind, never more needed than it is   to-day. “The conquests of the secrets of nature” says a writer speaking of the present condition of the world, ‘is child’s play in comparison with the overcoming of the difficulties of human co-operation.’ Yet as in the hour of need men turn instinctively to religion, so now in the hour of economic need men should turn more and more to co-operation, for co-operation is religion applied to business.

          The International Co-operative Alliance defines a cooperative as an autonomous association of persons united voluntarily to meet their common economic social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.


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 promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies, The government of India has brought 97th constitutional amendment on 13th January,2012. Accordingly, Government of Karnataka has brought amendment to Karnataka Co-operative Societies Act 1959. As per the amendment, The General Body of each co-operative society have, to get their accounts audited, by appointing an auditor or auditing firm from panel of auditors maintained by the Director of Co-operative Audit. 

The 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.

The Act also empowers the auditor at all times to have accessibility 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.


The important statutory provisions of Karnataka Cooperative Societies Act 1959 and Rules 1960 and with reference to audit are as listed below:

Audit of Co-operatives is conducted as per provisions of Section 63 of the Karnataka Co-operative Societies Act, 1959.

·        According to section 63(1) “ Every Co-operative society shall get its accounts audited at least once in each year by an auditor or an auditing firm appointed by the general body from the panel of auditors approved by the Director of Co-operative Audit and  the Director of co-operative audit is the authority to prepare and maintain a panel of auditors or auditing firms.” (sub Rule 6 ,8 and 9 of Rule 29B and sub Rule 12 of Rule 29B)

·        According to  Section 63(4)- The audit under sub section1 of section 63 or under sec 98(U) or sec 98(V) shall include an examination of overdue debts if any, the physicial verification and valuation of assets and Liabilities, Verification of cash balance and securities, certification of the profits or losses, compliance with the transparency law and other laws applicable to the Co-operative societies including the instructions and directives of NABARD  or RBI and an examination of the working and the other prescribed particulars of the society.

·        According to  Section 63(5) – The auditor or auditing firms shall at all times have access to all the books , Accounts, Documents, Papers, Securities, Cash and other properties (Sub rule 1 of Rule 29 ) belonging to the society or in the custody of any member of the board or the office bearer or the chief executive or any other employee of the society and may summon any person in possession or responsible of the custody to produce the same at the Registered office of the society or   at any branch thereof or at any  public office at the head quarters of the society.

Ø  Section 63(7)-  The board of every Co-operative society shall ensure that the annual financial statements like the Receipts and Payments or income and expenditure, profit and loss and the balance sheet along with such schedules and other statements  are prepared and presented for the audit before the auditor and auditing firm within 30 days of the closure of that  co-operative year (sub Rule 3 of Rule 29).

Ø  According to section 63(14) , the auditor has to inquire,

(a)               Whether The loans and advances made by the co-operative society are properly secured and are not prejudicial to the interest of the co-operative society or its members.

(b)              Whether The transactions of the co-operative society are not prejudicial to the interest of the co-operative society.

(c)              Whether personal expenses have been charged to revenue account.

(d)              Whether the position as stated in the account books and the balance sheet of the co-operative society is correct, regular and not misleading. And

(e)              Whether any special issue referred for enquiry by Reserve bank or National Bank duly enquired into and reported to the concerned

(sub Rule 11 of Rule 29B)

Ø  According to section 63(15) , the auditor shall make a report to the  co-operative society on the accounts examined by him. The report shall state whether in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information required by this act, in the manner so required and give a true and fair view,

(a)              In case of Balance Sheet

(b)              In case of Profit and Loss Account, the profit or loss of the year

According to section 63(16) , the auditor’s report shall also state

(a)              For the purpose of audit ,he has obtained all  the necessary information and explanation to best of his knowledge and belief

(b)              Whether in his opinion proper books of accounts have been  maintained  and proper returns have been received for the purpose of audit from the branches.

(c)              How he has dealt with the audit report of branch office audited by a person other than the auditor.

(d)              Whether  the co-operative societies Balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns.

Ø  According to section 63(17) , the audit report shall have

(a)              All the particulars  of  the defects or the irregularities observed in the audit and in case of financial irregularities and misappropriation or embezzlement of funds or fraud, the auditor or the auditing firm shall investigate and report the modus operandi, the entrustment, amount involved and fix the responsibility for such act on the members of Board or the employees of the society or any other person as the case may be with all necessary evidence.

(b)              Accounting irregularities and their implications on the financial statement to be indicated in detail in the report with corresponding effects on profit and loss.(sub Rule 4 of Rule 29)

(c)              The functioning of the general body , board and sub committees to be checked and any irregularities or violations observed to be reported duly fixing the responsibilities for such acts.

(d)              All schedules and other statements as may  be prescribed. (sub Rule3 of Rule29)

Ø  According to section 63(18) ,whether any matter referred to in clauses (a) and (b) of sub-section 14 or clauses (a) and (b) of sub-section 15, clauses (a) to (d) of sub-section 16 is answered in the negative or with a qualifying observation, the auditor’s report shall state the reason for the answer ( Sub Rule 2 of rule 29).

Ø Rule 30: The remuneration payable  to an Auditor or Auditing Firm for auditing of accounts of a co-operative society of any co-operative year shall be  fixed by the General body of that society based on working capital and turnover as per guidelines issued by the Director of Co-operative Audit from time to time.

"Co-operation is the gateway to economic freedom"

Mahatma Gandhi

"Ensure me a good panchayath, a good school
and a good co-operative society :
I will ensure you the Ramarajya"

Pandit Jawaharlal Nehru



In pursuit of bringing in a higher degree of transparency in the Government, The State Government is implementing the e-governance strategy throughout the state in all departments. In keeping with the policy, the Department of Co-operative Audit is also striving hard not only to bring in transparency in the administration of the department This website being citizen friendly, it helps every individual who is interested to participate in the business of a particular Co-operative society as it provides comprehensive information, Apart from helping an individual as explained above, the website also provides a plethora of information required by members of the society, the common citizens and also to the Government at the touch of a button.

Department of Co-operative Audit.


                                                                        Department of Co-operative Audit.