Co-operation · Ch 5 — Accounts and Audit of Co-operative Societies
Audit Report and Rectification of Defects
Audit Report and Rectification of Defects
The audit does not end when the auditor finishes checking the books. Its findings must be put in writing and, more importantly, the faults it uncovers must be put right. Two steps complete the cycle — the audit report and the rectification of defects.
The audit report. After completing the audit the auditor prepares and submits an audit report (with a detailed audit memorandum) to the society and to the Registrar of Co-operative Societies. A co-operative audit report is far more than a signature on the balance sheet; it typically:
- states whether the balance sheet and profit & loss account give a true and fair view of the society's affairs;
- records the audit class (A/B/C/D) awarded to the society;
- lists the defects, errors, irregularities and breaches of the Act, Rules or bye-laws found during the audit;
- points out losses, misappropriation or negligence, naming (where possible) the persons responsible so that the loss can be recovered from them;
- makes suggestions for improving the working, record-keeping and recovery of the society.
A Report That Names Faults, Not Just Figures
Because the co-operative auditor must protect members' money, the report is expected to point a finger — to say plainly what is wrong, who is responsible, and how much has been lost. A polite report that hides defects would defeat the very purpose of a co-operative audit.
Rectification of defects. A report has no value unless its findings are acted upon. The law therefore requires the society to rectify the defects pointed out in the audit report. The managing committee must consider each defect, take the necessary corrective action — correct wrong entries, recover losses, make good shortages, tighten procedures, obtain the sanctions it had omitted — and then submit a rectification report to the Registrar within the prescribed period, stating what has been done about each defect. …
The written report submitted by the auditor to the society and the Registrar, stating whether the accounts are true and fair, awarding the audit class, and listing the defects, irregularit …
The corrective action a society is required to take on the faults pointed out in its audit report — correcting entries, recovering losses and tightening procedures — followed by a recti …