An Unveil Professional Opportunity of Cooperative Banks Audits

It was emphasized that the business in cooperative Banks i.e. State cooperative banks and district cooperative banks needs to be conducted in a manner not detrimental to the intents of the depositors and as these entities being Banks are subject to the regulatory
provisions of the banking Regulation Act, 1949 (AACS), it is essential that the Statutory Audit in
State Cooperative banks and district cooperative banks need to be conducted by Chartered accountants.

Under the revival package for STCCS in 2013, the State Governments signed a
Memorandum of Association with Government of India and NABARD and under
that understanding, it was agreed in Clause 9.20 of the Memorandum of
Understanding, that the audits of State Cooperative Banks and CCBs shall be
audited by the professional Chartered Accountants from the panel approved by
NABARD.

This professional opportunity generated because of 97th amendment of the
Constitution of India which crafted a way for State Governments to ensure
conduct of audit in cooperatives and also provide a panel of auditors.
Section 243 ZM (1) of Constitution 97th amendment Act 2011 envisages that ‘The
legislature of a state may make provisions with respect to the maintenance of
accounts by cooperative Societies and the auditing of such accounts at least
once in each year provided that such audits or auditing firms shall be appointed
from the panel approved by the state Government or an authority authorised by
the state Government in this behalf.

The said amendments and MOU has overridden a provision of Audit as per
Section 17 of the Co-Operative Societies Act, 1912. Where in a Registrar was
autorised to audit or cause to be audited by some person authorised by him by
general or special order in writing in this behalf the accounts of every registered
society once at least in every year. However 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 co-operation and accountancy as also a person who has
served as an auditor in the co-operative department of a government to act as an
auditor. Hence the auditors of a co-operative society were being appointed by the
Registrar of Co-operative Societies and the auditor so appointed conducting the
audit on behalf of the Registrar and submits their report to him as also to the
society. The audit fees are paid by the society on the basis of statutory scale of
fees prescribed by the Registrar, according to the category of the society
audited.

The Institutional Development department of National Bank for Agriculture & Rural
Development (NABARD) has already communicated to the Registrar of
Cooperative societies of all the state Government through its letter NBIDD/
(Coop) /1399/D-11/ 2014-15/ Circular no. 14 /IDD01/ 2015 dated 16th January
2015 that RCS of the state Government may provide a panel of Chartered
Accountants to these Banks for conduct of statutory audit from the year 2014-15
onward. NABARD has issued a broad guidelines for per guidelines RCS may
provide a suitable panel to cooperative Banks of the state from 2014-15 onward
or the RCS may approach NABARD for the panel.
Broad Guidelines for empanelling Chartered accountants for conduct of Statutory
Audits in Cooperative banks.

1. The selection of the auditors is to be made from the list of chartered
accountants provided by the Institute of Chartered Accountants of India (ICAI).
2. The selection of auditors shall be based on factors like Number of FCA/ ACA
available with the firm, year of establishment and number of years of experience
in Bank Audits etc.
3. As far as possible CA firms falling in Category I & II are to be chosen. However
firms of III category with good experience may also be chosen.
4. Only those audit firms whose names appear in the Diploma in Information and
System Accounting (DISA) qualified list of CAs provided by The Institute of
Chartered accountants of India are to be considered for appointment of Statutory
Auditors.
5. Audit firm that has served as Statutory Auditors for consecutively for three years
is to be rested for the next two years.
6. Audit to be conducted as per the extant guidelines of NABARD /RBI issued from
time to time and instructions issued by RCS under the provisions of the relevant
acts.
The author has recently written letters to the Chief Ministers of Uttar Pradesh,
Rajasthan, Madhya Pradesh , Bihar, Jharkhand, Chhattisgarh & Uttrakhand , the
states fallen in the Central region of the ICAI to take up the matter of releasing
the penal of auditors by RCS at the earliest. The author stressed on the need and
importance to conduct and timely completion of the audits. Also cautioned that
the financial year to be audited has already ended and the penal is not getting
any shape as per terms of the MOU signed with the GOI & NABARD. The author
has suggested that in this year, RCS should approach the NABARD to get a penal
as provided by the Institute of Chartered Accountants of India. NABARD is about
to release the penal for RRBs drawn from the list as provided by the ICAI and the
auditors for cooperative Banks could also be drawn from the same list. Further, it
is being requested to mend the policy to appoint the auditors from all the
categories for equal opportunity and distribution of audit work.
(About the Author- Author was Member of ICAI- Regional Research Committee
2013-14 and ICAI- Committee For Direct Taxes 2011-12 and can be reached at
email amresh_vashisht@yahoo.com or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6.
Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP,
INDIA)