Group 16: Cooperative Society Audit

Registration decides the legal starting point A single-State cooperative credit society and a society registered under the Multi-State Cooperative Societies Act 2002 are audited using identical appointment, shareholding and distribution rules copied from an old summary. Neither registration document nor applicable State law is inspected. Required: Apply the relevant cooperative-audit principles to these facts. (3 marks)

A familiar accountant replaces the statutory auditor A registered non-bank MSCS appoints a trusted bookkeeper who is not a chartered accountant and is not on the applicable approved auditor panel. Management says qualifications accepted under a different State society law and years of friendship suffice. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

The board leaves the first audit unappointed An MSCS board does not appoint its first auditor within one month of registration. The secretary signs a private appointment note instead, without a general meeting. Management says subsequent AGM appointment rules and the secretary's convenience cure the failure. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Annual appointment mechanics and current continuity direction A non-bank MSCS properly appoints an eligible statutory audit firm forFY 2025-26. The firm remains eligible and empanelled in FY 2026-27. Management wants to switch it for a cheaper firm after only one year, without prior CRCS approval. It cites section 70(2)'s AGM-to-next-AGM wording and an old district-only panel restriction. The applicable 30 April 2026 order and 1 July 2026 corrigendum are supplied; no later revision exists for this exercise. Required: Apply the relevant cooperative-audit principles to these facts. (10 marks)

Panel membership hides a prohibited business relationship A statutory audit firm appears on the applicable current MSCS panel. A partner's relative has a non-audit business relationship with the society and holds its shares. The firm argues that inclusion on the list conclusively settles independence. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

An auditor borrows after appointment A duly appointed MSCS auditor becomes personally indebted to the society by Rs 5000 during the term. No exception is supplied. Management says disqualification is checked only on the first day. Required: Apply the relevant cooperative-audit principles to these facts. (3 marks)

Resignation creates a vacancy, not a free choice An MSCS auditor resigns. A manager appoints an unlisted friend to finish the report, although the approved panel from which the resigning auditor was appointed is known. The manager also treats the replacement as permanently appointed. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Cash shares, personal expenses and book-entry repayment An MSCS reports Rs 12 lakh cash share allotments but only Rs 9 lakh receipts can be traced. It includes Rs 1.2 lakh of a director's personal holiday in member-service expense. A Rs 4 lakh overdue loan is marked repaid by a journal transfer to a suspense account, with no receipt or substantiated discharge. Securities described as supporting another loan have no executed charge evidence. Management says ledger balance and an eligible auditor mean no special inquiries are needed. Required: Apply the relevant cooperative-audit principles to these facts. (10 marks)

Branches send totals without an adequate return An MSCS has two unvisited branches. One supplies only a profit total without assets, liabilities or source support; another was audited separately but the branch audit report is not forwarded. The main auditor treats arithmetic consolidation as sufficient statutory reporting. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

The report is withheld from members An MSCS secretary signs the statutory auditor report in the appointed auditor's place, refuses member inspection and says the auditor need not receive general-meeting notices. There is no valid replacement appointment. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

A member's passbook does not match the loan ledger A cooperative credit society ledger shows a member owing Rs 72000. The member's passbook shows two repayments of Rs 8000 each omitted from the ledger; numbered receipts exist but bank/cash records have not been checked. Management calls the member's limited literacy a reason to disregard the passbook. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Salary deductions collected but not remitted A credit society receives an employer schedule showing Rs 2.4 lakh deductions for member-loan repayments. Only Rs 1.8 lakh reaches its bank by year-end. The society marks every loan fully credited and says the employer list is cash evidence. The supplied contracts do not discharge member obligations merely on deduction; the legal status of the remaining claim needs assessment. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

An expired membership supports a new loan A society's supplied operative loan policy permits new loans only to active eligible members. The borrower register shows membership ceased before disbursement, but the manager uses an old member number as sole approval evidence. No exception or reinstatement is supplied. Required: Apply the relevant cooperative-audit principles to these facts. (3 marks)

Overdue ageing is replaced by optimistic labels A non-bank cooperative credit society has four loan balances in lakh: A 20, B 12, C 8 and D 10. Verified recoverable amounts are respectively 16, 9, 0 and 10 under the expressly supplied exercise valuation framework; no other adjustments apply. Its policy requires allowance equal to carrying amount minus supported recoverable amount, with no negative allowance. Management records total allowance only Rs 3 lakh because every account is labelled good. Ages are 2 months, 8 months, 6 years and 4 months respectively. The applicable ageing/reporting bands are supplied separately by the society; no RBI NPA rule is supplied. Required: Apply the relevant cooperative-audit principles to these facts. (10 marks)

Profit includes interest on overdue principal A non-bank cooperative credit society's supplied accounting framework requires excluding unrealised interest on the identified overdue principal from distributable profit. Its draft profit is Rs 9 lakh and contains Rs 1.5 lakh such unrealised interest. Management says the accrual journal proves collection. No other profit adjustment is supplied. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Bad-debt certification is copied across jurisdictions For Society E, the exercise supplies an operative rule requiring auditor certification before bad-debt write-off. Society F's supplied rule instead requires managing-committee authorisation and does not impose that certification requirement. E writes off on a manager memo; F's team invents a certification mandate solely from a Maharashtra example in the module. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Share limits in the bye-laws are tighter than management assumes The supplied valid operative bye-laws cap an ordinary member at 10% of total paid-up share capital Rs 40 lakh. One member holds Rs 5 lakh and proposes another Rs 1 lakh subscription; no exemption or rule change applies. Management uses a 20% figure from a different source and calls the whole subscription permissible. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Member benefit and an unexplained intermediary A cooperative purchasing society buys 1000 identical bags at Rs 800 each and pays an intermediary Rs 60000 with no service support. A comparable supplied direct delivered quote is Rs 820 per bag for the same quality, timing and terms. It sells 900 bags to members at Rs 850 each; 100 remain with verified cost Rs 800 per bag and net realisable amount Rs 760 per bag. The supplied framework uses lower of cost and net realisable value; no other costs/adjustments apply. Management says a positive trading margin proves all cooperative objectives met and the intermediary charge useful. Required: Apply the relevant cooperative-audit principles to these facts. (10 marks)

A borrowed-funds limit is exceeded despite repayment capacity A society's supplied valid bye-laws cap non-member deposits at Rs 25 lakh. Its register shows Rs 31 lakh, excluding an additional Rs 4 lakh received but parked in suspense. Management says assets exceed liabilities, so the cap need not be checked. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Investment consent is assumed from a high return A cooperative's supplied valid investment rules require specific approval for a proposed investment category. The committee buys it without approval because the yield is attractive and the seller is familiar. No exemption exists. Required: Apply the relevant cooperative-audit principles to these facts. (3 marks)

Profit is not all available for immediate dividends A non-bank MSCS has final correctly determined net profit Rs 20 lakh for the exercise year. It has been in profit in each of the preceding three financial years, and the supplied applicable section 63 A contribution base for this exercise is that Rs 20 lakh. No higher compulsory reserve percentage, prior losses, double-counted charge or other restriction is supplied. Management proposes distributing all Rs 20 lakh, paying nothing to education or rehabilitation funds and treating the 25% reserve minimum as the only condition. Apply the statutory minima and identify the remaining balance, not an automatically lawful dividend. Required: Apply the relevant cooperative-audit principles to these facts. (10 marks)

A statutory cap is applied to the wrong donation base A non-bank MSCS has correctly determined net profit Rs 30 lakh. A proposed donation Rs 2 lakh serves a permitted cooperative-development purpose. Other mandatory transfers and available funds are sufficient and separately verified, but management says the 5% donation cap in 63(2)(c) is calculated on totalassets Rs 100 lakh. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

The audit clock is confused with the appointment clock An MSCS auditor appointed under 70(2) submits its year-end audit report eight months after closing the financial year. Management says it complied because the society intimated appointment to the auditor within seven days and the auditor replied to the Central Registrar within thirty days. No extension or different applicable direction is supplied. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

National status changes the report route A national cooperative society subject to the MSCSAct keeps its audit report only in the managing committee file. A different ordinary non-national MSCS is told that 70(10) requires its report before Parliament merely because it is multi-state. Required: Apply the relevant cooperative-audit principles to these facts. (3 marks)

Bank standards are copied to a non-bank society A non-bank MSCS team copies banking accounting standards and treats them as automatically mandatory because its name includes credit. No Central Government-determined standards for the specific exercise class are supplied; management also claims any internal policy can replace the statutory standards framework. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Three subsidiary records disagree at year-end A cooperative has year-end loan ledger Rs 18 lakh and member confirmations totalling Rs 17 lakh. Numbered receipts Rs 1 lakh appear in the cash book but were not posted to member-loan accounts; actual banking of that Rs 1 lakh is not yet verified. Its stock ledger has 500 units at Rs 200, but verified physical count is 460, of which 40 have supported recoverable value Rs 120 each under the supplied lower-of-cost-and-recoverable-amount framework. A known supplier invoice Rs 18000 for goods already included in the physical count is omitted from liabilities; purchase/expense treatment needs tracing. Management proposes correcting only the loan ledger and certifying everything else. Required: Apply the relevant cooperative-audit principles to these facts. (10 marks)

Solvency danger is not the only special-audit condition The Central Government considers an MSCS financial position to endanger solvency and proposes special audit under 77. Central/StateGovernments together hold only 40% of paid-up capital/shares, with no other shareholding facts or statutory route supplied. Management says solvency danger alone makes 77 available without the proviso. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

A special auditor sends the report to the wrong audience For an MSCS special audit validly ordered under 77, the appointed auditor sends the report only to members, omits directions on an additional matter and says ordinary memberreporting necessarilycontrols. A valid Central Governmentdirection for the additional matter is supplied. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Inquiry and inspection are mistaken for the annual audit A creditor requests an inquiry under 78(1) into an MSCSconstitution, working and financialcondition. The Central Registrar proposes holding it with onlyfive daysnotice, calling the annual audit's accessright a substitute for the inquiry notice. No alternative 78(1 A)/(1 B)route is invoked. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)

Draft discussion becomes a veto over serious findings A society's supplied audit process calls for discussion of draft findings with the managing committee. The committee corrects a small posting error but demands that a supported personal profiteering transaction be deleted. It threatens to award its own audit class despite supplied Registrar criteria. Required: Apply the relevant cooperative-audit principles to these facts. (5 marks)