Statutory Audit under the MCS Act, 1960

For a co-operative society, audit is not a matter of choice. Section 81 of the Maharashtra Co-operative Societies Act, 1960 makes the audit of a society's accounts compulsory at least once in every co-operative year. An audit that is required by law in this way is called a statutory audit. Its whole purpose is to give members, creditors and the Registrar an independent assurance that the society's accounts are true and that its money has been handled lawfully.

What the statutory audit examines. The auditor does far more than add up figures. In a co-operative audit the auditor:

• verifies the accounts — checks the entries in the books against the vouchers and confirms that the trial balance, profit & loss account and balance sheet agree with the records;
• verifies cash and securities — physically checks the cash in hand, the bank balances and the investments and securities held;
• examines the valuation of assets and liabilities — confirms that assets are not overstated and that all liabilities have been brought into the books;
• checks compliance — sees whether the society's transactions are within the powers given by the Act, the Rules and its own bye-laws, and whether the resolutions of the general body and committee have been properly passed and acted upon;
• scrutinises loans and recoveries — examines whether loans were given as per rules, against proper security, and whether overdues are being pursued;
• detects errors and fraud — brings to light mistakes, irregularities, misappropriation of funds and losses caused by negligence.