CA Amresh Vashisht

It was emphasized that the business in cooperative Banks i.e. State cooperative banks and district cooperative banks needs to be conducted in a manner not detrimental to the intents of the depositors and as these entities being Banks are subject to the regulatory provisions of the banking Regulation Act, 1949 (AACS), it is essential that the Statutory Audit in State Cooperative banks and district cooperative banks need to be conducted by Chartered accountants.

Under the revival package for STCCS in 2013, the State Governments signed a Memorandum of Association with Government of India and NABARD and under that understanding, it was agreed in Clause 9.20 of the Memorandum of Understanding, that the audits of State Cooperative Banks and CCBs shall be audited by the professional Chartered Accountants from the panel approved by NABARD.

This professional opportunity generated because of 97th amendment of the Constitution of India which crafted a way for State Governments to ensure conduct of audit in cooperatives and also provide a panel of auditors.

Section 243 ZM (1) of Constitution 97th amendment Act 2011 envisages that ‘The legislature of a state may make provisions with respect to the maintenance of accounts by cooperative Societies and the auditing of such accounts at least once in each year provided that such audits or auditing firms shall be appointed from the panel approved by the state Government or an authority authorised by the state Government in this behalf.

The said amendments and MOU has overridden a provision of Audit as per Section 17 of the Co-Operative Societies Act, 1912. Where in a Registrar was autorised to audit or cause to be audited by some person authorised by him by general or special order in writing in this behalf the accounts of every registered society once at least in every year. However apart from a chartered accountant within the meaning of the Chartered Accountants Act, 1949, some of the State Co-operative Acts have permitted persons holding a government diploma in co-operative accounts or in co-operation and accountancy as also a person who has served as an auditor in the co-operative department of a government to act as an auditor. Hence the auditors of a co-operative society were being appointed by the Registrar of Co-operative Societies and the auditor so appointed conducting the audit on behalf of the Registrar and submits their report to him as also to the society. The audit fees are paid by the society on the basis of statutory scale of fees prescribed by the Registrar, according to the category of the society audited.

The Institutional Development department of National Bank for Agriculture & Rural Development (NABARD) has already communicated to the Registrar of Cooperative societies of all the state Government through its letter NBIDD/ (Coop) /1399/D-11/ 2014-15/ Circular no. 14 /IDD01/ 2015 dated 16th January 2015 that RCS of the state Government may provide a panel of Chartered Accountants to these Banks for conduct of statutory audit from the year 2014-15 onward. NABARD has issued a broad guidelines for per guidelines RCS may provide a suitable panel to cooperative Banks of the state from 2014-15 onward or the RCS may approach NABARD for the panel.

Broad Guidelines for empanelling Chartered accountants for conduct of Statutory Audits in Cooperative banks.

  1. The selection of the auditors is to be made from the list of chartered accountants provided by the Institute of Chartered Accountants of India (ICAI).
  2. The selection of auditors shall be based on factors like Number of FCA/ ACA available with the firm, year of establishment and number of years of experience in Bank Audits etc.
  3. As far as possible CA firms falling in Category I & II are to be chosen. However firms of III category with good experience may also be chosen.
  4. Only those audit firms whose names appear in the Diploma in Information and System Accounting (DISA) qualified list of CAs provided by The Institute of Chartered accountants of India are to be considered for appointment of Statutory Auditors.
  5. Audit firm that has served as Statutory Auditors for consecutively for three years is to be rested for the next two years.
  6. Audit to be conducted as per the extant guidelines of NABARD /RBI issued from time to time and instructions issued by RCS under the provisions of the relevant acts.

The author has recently written letters to the Chief Ministers of Uttar Pradesh, Rajasthan, Madhya Pradesh , Bihar, Jharkhand, Chhattisgarh & Uttrakhand , the states fallen in the Central region of the ICAI to take up the matter of releasing the penal of auditors by RCS at the earliest. The author stressed on the need and importance to conduct and timely completion of the audits. Also cautioned that the financial year to be audited has already ended and the penal is not getting any shape as per terms of the MOU signed with the GOI & NABARD. The author has suggested that in this year, RCS should approach the NABARD to get a penal as provided by the Institute of Chartered Accountants of India. NABARD is about to release the penal for RRBs drawn from the list as provided by the ICAI and the auditors for cooperative Banks could also be drawn from the same list. Further, it is being requested to mend the policy to appoint the auditors from all the categories for equal opportunity and distribution of audit work.

(About the Author- Author was Member of ICAI- Regional Research Committee 2013-14 and ICAI- Committee For Direct Taxes 2011-12 and can be reached at email or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA)

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