Section 33 in The Karnataka Souharda Sahakari Act, 1997
33. [ [Audit of Co-operatives] [Substituted by Act 4 of 2013 w.e.f. 11.02.2013.].
(1)Every Cooperative shall get its accounts audited at least once in a year before the first day of September following the close of the cooperative year by an auditor or an auditing firm appointed by the general body of the cooperative from a panel of auditors or auditing firms approved by the Director of cooperative audit;Provided that the Director of co-operative audit shall be the authority competent to prepare and maintain a list of auditors and auditing firms who satisfy the prescribed qualification and experience for undertaking the audit of accounts of the co-operatives in the state.[***] [Omitted by Act 34 of 2014 w.e.f. 06.09.2014.](2)The general body of every cooperative shall at its general meeting appoint an auditor or an auditing firm to audit the accounts of the cooperative for the cooperative year in which the general meeting is held.[Provided that, if the Director of Co-operative audit is satisfied that the Co-operative has failed to appoint an auditor or an auditing firm to audit its accounts for a Co-operative year in their general body and to intimate the same as provided in the Rules, the Director of Co-operative Audit after giving an opportunity of hearing in writing to the Co-operative and confirming that the Co-operative has not appointed an auditor or an auditing firm, may appoint an auditor or an auditing firm to audit the accounts of Co-operative from the approved panel of auditors or auditing firms and such an appointed auditor or auditing firm shall be deemed as the auditor or the auditing firm for the purpose of conducting audit of that Co-operative for that particular year under consideration;Provided further that in case of Government auditors mentioned in the panel of auditors or auditing firms maintained by the Director of Co-operative Audit, they shall be mentioned by designation only and that in case of a Co-operative selecting a Government Auditor from the Pannel of Auditors the Co-operative shall intimate to the Director of Co-operative Audit] [Inserted by Act 34 of 2014 w.e.f. 06.09.2014.](3)The manner of preparation of the list of auditors and auditing firms by the Director of co-operative audit and the procedure for giving the panel to each co-operative shall be as prescribed.(4)The audit under sub-section (1) shall include an examination of overdue debts, if any, the physical verification and valuation of the assets and liabilities, verification of the cash balance and securities, certification of the profits or losses, compliance with the transparency law and other laws applicable to the cooperatives including the instructions and directives of NABARD or Reserve Bank of India and an examination of the working and the other prescribed particulars of the cooperative.(5)The auditor or auditing firm shall at all times have access to all the books, accounts, documents, papers, securities, cash and other properties belonging to the cooperative or in the custody of any member of the board or the office-bearer or the chief executive or any other employee of the cooperative and may summon any person in possession or responsible for the custody of any such books, accounts, documents, papers, securities, cash or other properties to produce the same at the registered office of the cooperative or any branch thereof or at any public office at the headquarters of the cooperative.(6)Every person who is, or has at any time been, an officer or employee of the cooperative and every member and past member of the cooperative shall furnish such information in regard to the transactions and working of the cooperative as the Auditor or Auditing firms approved by the Director of Cooperative Audit may require.(7)The board of every cooperative 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 as may be prescribed as at the end of a cooperative year are prepared and presented for audit before the auditor or auditing firm within thirty days of the closure of that cooperative year.(8)The Auditor or Auditing firm shall conduct and complete the audit of accounts as provided for in this Act or the rules and send copies of the audit report and communicate the results of audit to the cooperative, the Federal cooperative, the Registrar, the Director of co-operative audit and to the financing bank or credit agency, and if the cooperative is affiliated to any other cooperative, to such cooperative, within the first day of September every year.(9)The auditor or auditing firms shall have right to receive all notices and every communication relating to the general meeting of a cooperative and, at the cost of the cooperative, shall be entitled to attend such meeting and to be heard at the general body meeting, in respect of all or any part of the business with which he is concerned as auditor or auditing firm.(10)If the result of the audit held under sub-section (1) discloses any defects in the working of the cooperative, the board shall take steps to rectify the defects and remedy the irregularities pointed out in the audit report and place the audit report along with the action taken report before the general meeting to be held before the twenty-fifth day of the September every year and explain therein the said defects or the irregularities. The board shall continue to take steps for rectification of all the defects and remedying of all the irregularities in the audit report and apprise the general meetings every year till all the defects are rectified and the irregularities are remedied. The board shall send a report of action taken to the Registrar, the Federal cooperative and the Director of Co-operative Audit within thirty days from the date of the general meeting.(11)The Director of Co-operative Audit shall submit the audit reports of the apex cooperatives to the State Government annually for being laid before the legislature in the manner prescribed.(12)If it appears to the general body of a co-operative that there is a prima-facie case of fraud or misappropriation or embezzlement of funds not detected or properly examined by the auditor during the regular audit or misclassification of accounts, the general body may resolve to provide for a re-audit of any account of the cooperative with a view to truly reflect the financial position of the cooperative and the provisions of the Act and the rules applicable to the audit shall apply to such re-audit;(13)If it appears to the State Government on an application by a cooperative or otherwise that it is necessary or expedient to re-audit the accounts of a cooperative, the State Government may, by an order provide for such re-audit and the provisions of the Act and the rules applicable to the audit shall apply to such re-audit.Provided that such re-audit shall be ordered only when there is a prima-facie case of fraud or misappropriation or embezzlement of funds not detected or properly examined by the auditor or auditing firms during regular audit or misclassification of accounts or for any other valid reasons with a view to truly reflect the financial position of the cooperative.(14)Without prejudice to the provisions of sub- sections (4) to (6), the auditor shall inquire;(a)Whether loans and advances made by the co-operative on the basis of security have been properly secured and whether terms on which they have been made are not prejudicial to the interests of the co-operative or its members;(b)Whether transactions of the co-operative which are represented merely by book entries are not prejudicial to the interests of the co-operative;(c)Whether personal expenses have been charged to revenue account;(d)Where it is stated in the books and papers of the co-operative that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance sheet is correct, regular and not misleading; and(e)Whether any special issue or subject matter referred to for inquiry by the Reserve Bank or National Bank has been duly enquired into and report thereof is submitted to the Reserve Bank or National Bank as the case may be.(15)The auditor shall make a report to the cooperative on the accounts examined by him and on every balance sheet and profit and loss account and on every other document required to be part of or annexed to the balance sheet or profit and loss account. 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 the case of the balance sheet, of the state of the cooperative's affairs as at the end of the year; and(b)in the case of the profit and loss account, of the profit or loss for the year.(16)The auditor's report shall also state,-(a)state whether he has obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his audit;(b)state whether in his opinion, proper books of accounts have been kept by the co-operative so far as appears from his examination of those books and proper returns adequate for the purpose of his audit have been received from branches or offices of the co-operative not visited by him;(c)state whether the report on the accounts of any branch office audited by a person other than the cooperative's auditor has been forwarded to him and how he has dealt with the same in preparing the auditor's report;(d)state whether the cooperative's balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and returns;(17)Where any of the matters referred to in clauses (a) and (b) of sub-section (14) or in clauses (a) and (b) of sub-section (15) or clause (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.(18)The audit report shall have,-(a)all particulars of the defects are the irregularities observed in audit and in case of financial irregularities and misappropriation or embezzlement of funds or fraud, the auditor or auditing firm shall investigate and report the modus operandi, the entrustment, amount involved, and fix the responsibility for such misappropriation or embezzlement of funds or fraud, on the members of the board or the employees of the cooperative or any other person as the case may be with all necessary evidence.(b)accounting irregularities and their implications on the financial statements to be indicated in detail in the report with the corresponding effects on the profit and loss.(c)the functioning of the general body, board and sub-committees of the Co-operative to be checked and any irregularities or violations observed reported duly fixing the responsibilities for such irregularities or violations.(d)all schedules and other statements as may be prescribed.(19)[ The remuneration of the auditor or auditing firm of a Co-operative shall be borne by the Co-operative and shall be at such rates as may be fixed by general body of the Co-operative based on the Working Capital and Turnover of the Co-operative as per the guidelines issued by Director of Co-operative audit from time to time.(20)Notwithstanding anything contained in the preceding sub-sections, the Director of Co-operative Audit subject to the approval of State Government shall have power to re-examine or re-verify particular account or accounts of the audited accounts of any Co-operative pertaining to preceding three years and instruct the concerned auditor to incorporate the lapses observed during such re-examination or re-verification in the next audit report to be issued.Explanation. - For the purpose of this Section;(i)'Auditor' means an auditor or an officer of the Department of Co-operative Audit who has passed, in addition to the graduation or post graduation degree, Higher Diploma in Co-operative Management / Diploma in Co-operative Audit / General Diploma in Co-operative Management and who has completed the period of probation successfully and who has a working knowledge of the Kannada language; orA Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 who shall have a fair knowledge of the functioning of the Co-operatives and shall have an experience of at least three years in auditing and who would like to be included in the panel and such chartered accountant shall have adequate understanding and knowledge of the Kannada language sufficient for the due performance of auditing Or a Cost Accountant within the meaning of Cost and Works Accountant Act, 1959, who shall have fair knowledge of the functioning of the Co-operatives and shall have an experience of atleast 3 years in auditing and shall have working knowledge of kannada language.'Auditing firm' means a firm of more than one Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 Or a firm of more than one Cost Accountant within the meaning of Cost and Works Accountant Act, 1959 who or which shall have a fair knowledge of the functioning of the Co-operatives and shall have an experience of at least three years in auditing and which would like to be included in the panel and such chartered accountants shall have adequate understanding and knowledge of the Kannada language sufficient for the due performance of auditing."] [Substituted by Act 34 of 2014 w.e.f. 06.09.2014.]]
