Page 275 - CA Inter Audit PARAM

CA Ravi Taori

QNO Qualification of Auditor (Non-CA Appointed Tax Auditor)- Old Course-- (M18E)
AOC.01 Bhaskar CNO - AOC.040
Mr. M, has served as an auditor in the Co-Operative Department of a Government, is appointed as a
statutory auditor by a Co-Operative Society that has receipts over Rs 3 crores during the financial year. He

is not a Chartered Accountant. Mr. D, Chartered Accountant is appointed to conduct tax audit of the society
under section 44AB of the Income Tax Act, 1961. Comment.
Answer ➢ Provision:
Qualifications and Appointment of Auditors –
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 cooperation and
accountancy and
also a person who has served as an auditor in the cooperative department of a government
to act as an auditor.

An auditor of a co-operative society is appointed by the Registrar of Co-operative Societies and the
auditor so appointed conducts the audit on behalf of the Registrar and submits his report to him as
also to the society.

➢ Applicability and Conclusion:
Thus, in view of above provisions, appointment of Mr. M as statutory auditor and Mr. D as tax auditor
under Section 44 AB is in order.

QNO-- Case on Shareholding & Borrowing New Course – (J25M)
AOC.01.20 Bhaskar CNO – AOC.040

Aman Cooperative Society appointed FAB & Associates as an auditor for the financial year 2023-2024.
During the audit, the auditors noted the following details:

Number of shares 1000 shares @ ₹ 10/- each
Net Profit before compulsory transfer to ₹ 10,000 /-
reserve fund
Net Profit after compulsory transfer to ₹ 8,000 /-
reserve fund

(I) Mr. Dhairya, a member of society, holds 200 shares amounting to ₹ 2000 from the previous year.

(II) Upon verifying the society’s borrowings, the auditors found that Cooperative Society had
accepted a loan from Mr. Shivam, a nonmember. The auditors did not find any restrictions
regarding this in the society’s bye laws.

Comment on the above transactions of the society with reference to the Co-operative Societies Act,
1912.

Answer Restrictions on share holdings: - According to section 5 of the Central Act, in the case of a society where
the liability of a member of the society is limited, no member of a society other than a registered society
can hold such portion of the share capital of the society as would exceed a maximum of twenty percent of
the total number of shares or of the value of shareholding to ₹ 1,000/-.
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