Rule No 69. Procedure for appointment of auditors and for conducting audit
(1) The audit of accounts of societies shall be conducted by Departmental Auditors or by
certified auditors appointed by the Registrar from time to time on such terms and
conditions as he deems fit :
Provided that any society or class of societies notified by the Registrar may get
their accounts audited by an auditor selected from the panel of certified auditors
maintained by the Registrar and published by him in the Official Gazette.
For the purposes of this Chapter, audit shall include annual
or periodical audit, continuous or concurrent audit and test or super audit and
For purposes of this rule, "a certified auditor"
(a) a Chartered Accountant within the meaning of the Chartered
Accountants Act, 1949;
(b) a person who holds a Government Diploma in co-operative accounts or
a Government Diploma in co-operation and accountancy; or
(c) a person who has served as an auditor in the Co-operative Department
of the State Government, and whose name has been included by the Registrar in
the panel of certified auditors maintained and published by him in the Official
Gazette at least once every three years.
(2) The audit under Section 84
shall in all cases extend back to the last date of
the previous audit and shall be carried out upto the last date of the co-operative year
immediately preceding the audit or where the Registrar so directs in the case of any
particular society or class of societies, such other date as may be specified by the
(3) The auditor shall submit an audit memorandum to the society and to the
Registrar in the form specified by the Registrar, on the accounts examined by him
and on the balance sheet and profit and loss account as on the date and for the
period up to which the accounts have been audited, and shall state whether in his
opinion and to the best of his information and according to the explanation given to
him, the said accounts give all the information required by the Act in the manner so
required and give true and fair view:-
(i) in the case of the balance sheet, of the state of societys affairs as at
the end of the financial year or any other subsequent date up to which the
accounts are made up and examined by him, and
(ii) in the case of the profit and loss account, of the profit or loss for the
financial year or the period covered by the audit, as the case may be.
(4) The audit memorandum shall state:-
(i) whether the auditor had obtained all the information and explanations
which to the best of his knowledge and belief were necessary for the purpose of
(ii) whether in his opinion proper books of accounts, as required by the Act,
these rules and the by-laws of the society have been kept by the society so far
as it appears from the examination of these books; and
(iii) whether the balance sheet and profit and loss account examined by him
are in agreement with the books of accounts and returns of the society.
(5) Where any of the matters referred to in sub-rule (4) are answered in the
negative or with a qualification, the audit memorandum shall specify the reasons for
(6) The audit memorandum shall also contain schedules with full particulars of:-
(i) all transactions which appear to be contrary to the provisions of the
Act, the rules or the by-laws of the society;
(ii) all sums which ought to have been but have not been brought into
account by the society;
(III) any material impropriety or irregularity in the expenditure or in the
realisation of moneys due to the society;
(iv) any money or property belonging to the society which appear to the
auditor to be bad or doubtful debt; and
(v) any other matters specified by the Registrar in this behalf.
(7) The summary of audit memorandum as prepared by auditor shall be read
out in a general meeting. The audit memorandum together with its accompaniments
shall be open to inspection by any member of the society. The Registrar may
however direct that any portion of the audit memorandum which appears to him to
be of objectionable nature or not justified by facts shall be expunged and the portion
so expunged shall not form part of the audit memorandum.
(8) The Registrar may from time to time specify the form or forms in which the
statements of accounts and information shall be prepared for audit by the society.
(9) On completion of his statutory audit, the auditor shall award an audit
classification letter to the society whose accounts he has audited in accordance with
the instructions issued by the Registrar from time to time. The list of societies to be
published under sub-section (3) of Section 12
shall also specify the audit class of the
Rule No 71. Procedure and principles for the conduct of inquiry and inspection
(1) An order authorising inqiry under Section 83
or inspection under Section 84
among other things, contain the following:-
(a) the name of the person authorised to conduct the inquiry or inspection;
(b) the name of the society whose affairs are to be inquired into or whose
books are to be inspected;
(c) the specific point or points on which the inquiry or inspection is to be
made, the period within which the inquiry, or inspection is to be completed and
report submitted to the Registrar;
(d) cost of inquiry;
(e) any other matter relating to the inquiry or inspection.
(2) A copy of every order authorising inquiry under Section 83 or inspection
under Section 84
shall be supplied to the federal society or societies to which the
society in respect of which the order is issued is affiliated.
(3) If the inquiry or inspection cannot be completed within the time specified in
the order referred to in sub-rule (I), the person conducting the inquiry or inspection
shall submit an interim report stating the reasons for failure to complete the inquiry
or inspection and the Registrar, if he is satisfied, grant such extension of time for the
completion of the inquiry or inspection as he may deem necessary or he may
withdraw the inquiry or inspection from the officer to whom it is entrusted and hold
the inquiry or inspection himself or entrust it to such other person as he deems fit.
(4) On receipt of the order referred to in sub-rule (J), the person authorised to
conduct the inquiry or inspection shall proceed to examine the relevant books of
accounts and other documents in possession of the society or any of its officers,
members, agents or servants and obtain such information or explanation from any
such officers, members, agents or servants of the society in regard to the
transactions and working of the society as he deems necessary for the conduct of
such inquiry or inspection.
(5) The person authorised to conduct the inquiry or inspection shall submit his
report to the Registrar, on all the points mentioned in the order referred to in subrule
(i). The report shall contain his findings and the reasons therefor supported by
such documentary or other evidence as recorded by him during the course of his
inquiry or inspection. He shall also specify in his report the costs of the inquiry or
inspection together with reasons and recommend to the Registrar the manner in
which the entire cost or a part thereof may be apportioned, amongst the parties
specified in sub-section (I) of Section 85
. The Registrar shall pass such orders
thereon as may be considered just after giving a reasonable opportunity of being
heard to the person or persons concerned.
(6) The costs of the inquiry or inspection apportioned by the Registrar under
subsection (1) of Section 85
shall be recovered as provided in Section 86
Registrar may direct that such costs or any part thereof shall be paid in the first
instance from the funds of the society or in case of inspection, from the amount
deposited by the creditor under clause (b) of sub-section (i) of Section 84
recovered and repaid to the society or the creditor, as the case may be.
Rule No 72. Procedure for assessing damages against delinquent promoters, etc. under Section 88
(1) On receipt of a report referred to in Section 88
the Registrar or any other person authorised by him may make such further inquiries
as he may deem necessary regarding the extent to which the person who has taken
any part in the organisation or management of a society or any deceased, past or
present officer of the society has misapplied or retained, or become liable or
accountable for, any money or property of the society, or has committed
misfeasance or breach of trust in relation to the society.
(2) On the completion of the further inquiries under sub-rule (J), where
necessary, the Registrar or the person authorised by him shall issue a notice to the
person or persons concerned furnishing him or them with particulars of the acts of
misapplication, retention, misfeasance or breach of trust and the extent of his or
their liability involved therein and calling upon him or them to put in statement in his
or their defence within fifteen days of the date of issue of the notice.
(3) On receipt of the statements referred to in sub-rule (2), the Registrar or the
person authorised by him, if he is satisfied that there are reasonable grounds for
holding the person or persons liable, shall frame charges.
(4) The person or persons concerned shall, after the charges are framed be
asked to put in his statement in defence and to indicate the documentary or oral
evidence which he would like to produce. The Registrar or the person authorised by
him may permit production of other documentary or oral evidence, if considered
(5) The Registrar or the person authorised by him shall thereafter record the
evidence led by the society or the person or persons concerned and take on record
the documents proved by them and shall thereafter fix a date for hearing arguments
of both the parties.
(6) On the day fixed for hearing under sub-rule (5), the Registrar or the person
authorised by him, shall hear the arguments and may pass his final orders on the
same day or any date fixed by him within sixty days from the date on which the
hearing was completed. On the date so fixed, 1
[the Registrar or, as the case may be,
the person authorised by him shall make his final order] either ordering repayment
of the money or return of the property to the society together with interest at such
rate as may be specified by him or to contribute such amount to the assets of the
society by way of compensation in regard to misapplication, retention, misfeasance
or breach of trust as may be determined or may reject the claim submitted on behalf
of the society.
(7) The Registrar of the person authorised by him, may also provide in his order
for the payment of the cost of the proceeding under this rule or any part of such cost
as he thinks just.
(8) The Registrar or the person authorised by him shall furnish a copy of his
order, under sub-rule (6) to the party concerned within ten days of the date on
which he makes his final order.