Page 279 - CA Inter Audit PARAM

CA Ravi Taori
QNO Co-operative Society- Special Audit - Section 77- Old Course-- (M19E/SM20/SM21/M23M)
AOC.11 Bhaskar CNO - AOC.100 New Course – (S24R)
Central Govt. hold 55% of the paid-up share Capital in Kisan Credit Co-operative Society, which is incurring
huge losses. Advise when the Central Government can direct Special Audit under Section 77 of the Multi State
Co-operative Society Act.
Answer ➢ Shareholding required for order of special Audit:
Central Government shall order for special audit only if that Government or the State Government either

by itself or both hold fifty-one percent or more of the paid-up share capital in such Multi -State co-
operative society.

➢ When order of special audit is given:
Under section 77 of the Multi-State Cooperative Societies Act, 2002, where the Central Government is of
the opinion:
That the affairs of any Multi-State co-operative society are not being managed in accordance with
self-help and mutual deed and co-operative principles or prudent commercial practices or with
sound business principles; or
that any Multi-State co-operative society is being managed in a manner likely to cause serious
injury or damage to the interests of the trade industry or business to which it pertains; or
that the financial position of any Multi-State co-operative society is such as to endanger its
solvency.

➢ Conclusion
Thus, in the given case since Central Govt is holding 55% shares and financial position of Kisan Credit co-
operative society is in danger, Central government can direct for special audit.

Disqualification in Multi State - Senior Manager Proposed to be Appointed as Old Course – (M23E)
QNO— Auditor New Course – (S24M)
AOC.11.50
Bhaskar CNO - AOC.100
CA. Z. a Chartered Accountant is the Senior manager of a Multi-State Co-operative Society in Mumbai. He is
proposed to be appointed as an auditor of the said Multi -State Co- operative Society. Analyse the provisions
of the Multi-State Co-operative Societies Act, 2002 and comment on validity of proposed appointment.

OR

Section 72(1) of the Multi-State Co-operative Societies Act, 2002 states that only a person who is a Chartered
Accountant within the meaning of the Chartered Accountants Act, 1949 can be appointed as an auditor of
a multi-state co-operative society. Who, according to Section 72(2), is disqualified from being appointed as
auditors of a multi-state co-operative society?
Answer Section 72 of the Multi-State Co-operative Societies Act, 2002 states that a person who is a Chartered
Accountant within the meaning of the Chartered Accountants Act, 1949 can only be appointed as auditor of
multi-state co-operative society.

Considering the facts given in the question, the following persons are not eligible for appointment as auditors
of a multi-state co-operative society-

(a) An officer or employee of the multi-state co-operative society.
(b) A person who is a member or who is in the employment, of an officer or employee of the Multi-State
co-operative society.

In view of above, CA, Z being officer of Multi State Co-operative Society is not eligible for appointment as
Auditor and therefore proposed appointment of CA Z is not valid.

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