Unit 5: Audit Programme for Selected Societies

Cooperative Audit: Audit Programme for Selected Societies

Various Stages of Audit

A cooperative audit is conducted in systematic stages to ensure accuracy, compliance, and efficiency.

Stages of Audit

1. Preliminary Stage

   • Study bylaws, previous audit reports, AGM minutes, and accounts.

   • Prepare audit programme.

2. Routine Checking Stage

   • Examine cashbook, ledger, vouchers.

   • Check arithmetic accuracy of accounts.

3. Verification Stage

   • Physically verify cash, loans, deposits, assets, and stock.

   • Confirm liabilities, dues, and provisions.

4. Valuation Stage

   • Determine value of assets and liabilities.

   • Calculate depreciation, reserves, and contingencies.

5. Reporting Stage

   • Prepare audit report, audit certificate, and classification.

   • Submit final audit memorandum to Registrar/Head Office.

Audit Procedures for Different Cooperatives

Audit procedures vary according to the type of cooperative.

Cooperative Type	Key Audit Procedures
Cooperative Credit Institutions (PACS, DCCBs, LDBs)	- Check loans & advances: issue, recovery, overdue - Interest calculation & NPA provision - Cash, deposits, and investments verification - Compliance with Cooperative Credit norms & RBI/ NABARD guidelines
Marketing Societies	- Check purchases, sales, stock registers - Verify price support schemes & government subsidies - Audit accounts of members’ produce and settlements
Consumer Stores	- Verify purchases and sales - Check inventory & stock valuation - Ensure compliance with consumer rights & pricing
Housing Societies	- Examine member contributions & share capital - Check maintenance fund, loans, and expenses - Audit construction costs & contracts
Milk Producers Societies (Dairy Cooperatives)	- Verify milk collection & payments to members - Check procurement cost, storage, and sales - Audit subsidies from NDDB/AMUL pattern - Confirm reserves & capital fund
Industrial Cooperatives (Handlooms, Weavers, Printing, Fisheries, LAMPS, etc.)	- Examine production & sales records - Check loans, machinery, raw material stocks - Verify labor wages, contracts, and subsidies - Check capital and contingency reserves

Each type requires sector-specific verification while following general accounting & audit principles.

Classification on RBI Standards (for Cooperative Credit Institutions)

Cooperative banks often follow RBI classification of assets/loans:

Classification	Meaning
Standard Assets	Loans with no overdue, performing well
Substandard Assets	Loans overdue for < 12 months, some risk
Doubtful Assets	Loans overdue for > 12 months, likely losses
Loss Assets	Loans considered uncollectible, need provisioning

Classification ensures accurate provisioning, risk assessment, and financial health evaluation.

Preparation of Final Audit Memorandum

The Audit Memorandum is the final document submitted to the Registrar/Head Office.

Contents of Audit Memorandum

1. Introduction - Name of society, period audited, auditor details.
2. Scope of Audit - Type of audit, branches covered, procedures followed.
3. Observations - Routine checking, vouching, verification, valuation.
4. Financial Analysis - Profit & Loss account, Balance Sheet review, reserves, depreciation.
5. Compliance Check - Bylaws, statutes, government orders.
6. Classification - Society graded as A, B, C, D.
7. Recommendations - Corrective measures, suggestions for efficiency.
8. Conclusion - Overall remarks on financial health, management, and compliance.

Enclosures with Audit Memorandum

• Copies of Balance Sheet & P&L account
• Bank Reconciliation Statements
• Loan & Deposit Register Summaries
• Stock Verification Reports
• Previous Audit Report Reference
• Compliance Certificates & Objections

Enclosures provide evidence & support for auditor’s conclusions and help management & Registrar in decision-making.

Summary Flow – Audit Programme for Selected Societies

Flow of Audit Process:

1. Preliminary Stage → Study bylaws, past audits, plan audit
2. Routine Checking → Verify ledger, vouchers, cash
3. Verification → Physical check of cash, loans, stock, assets
4. Valuation & Depreciation → Assign value to assets & liabilities
5. Sector-Specific Audit Procedures → Credit, Marketing, Consumer, Dairy, Housing, Industrial
6. Classification → Use RBI / Registrar grading
7. Preparation of Audit Memorandum → Observations, report, recommendations
8. Submission → Memorandum + enclosures sent to Registrar / HO