• As compared to other areas of our practice Audit of Co-operative societies has been the domain of few professional brothers.
• It has also received comparatively less attention in the wake of recent developments that has taken place in the field of auditing.
• The cooperative sector is largely regulated by the respective states and the regulators of this sector have shown less dynamism vis-à-vis the corporate and other sectors.
• Another reason that could be is the co-existence of co-operative departments own auditors and the members of ICAI. The members of ICAI are bound by the stipulations and guidance announced by the Institute. Where as the Departments auditors are not bound by such things as announced by institute.
• There is definitely a gap between the conceptual understanding between both these auditors though the object of both of them is one and the same.
What is our role as auditors?
• We at the time of expressing our opinion on the financial statements of the society have to see that the management has followed the relevant accounting standards applicable to the society. If in case such standards are not followed then a suitable expression should be included in the opinion expressed by the auditors.
• There is one more angle to this and that is regarding the audit report to be given by the auditor. The format of Audit Report under SA 700, the following relevant para reads as under.
• An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the management, as well as evaluating the overall presentation of the financial statement.
Applicability of Accounting Standards
• For the purpose of applicability of Accounting Standards, enterprises are classified into three categories, viz., Level I, Level II and Level III. Level II and Level III enterprises are considered as SMEs. The criteria for different levels are given below.
Level I Enterprises
• Enterprises which fall in any one or more of the following categories, at any time during the accounting period, are classified as Level I enterprises:
• Enterprises whose equity or debt securities are listed whether in India or outside India.
• Enterprises which are in the process of listing their equity or debt securities as evidenced by the board of directors’ resolution in this regard.
• Banks including co-operative banks.
• Financial institutions.
• Enterprises carrying on insurance business.
• All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 50 crore. Turnover does not include ‘other income’.
• All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs.10 crore at any time during the accounting period.
• Holding and subsidiary enterprises of any one of the above at any time during the accounting period. Level II
Level II Enterprises
• Enterprises which are not Level I enterprises but fall in any one or more of the following categories are classified as Level II enterprises:
• All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 40 lakhs but does not exceed Rs. 50 crore. Turnover does not include ‘other income’.
• All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 1 crore but not in excess of Rs. 10 crore at any time during the accounting period.
• Holding and subsidiary enterprises of any one of the above at any time during the accounting period.
Level III Enterprises
• Enterprises which are not covered under Level I and Level II are considered as Level III enterprises.
Applicability of Accounting Standards
• Accounting Standards are applicable to the Co-operative Societies.
• Their recognition, measurement and disclosure criteria will depend on, the level to which the society belongs.
• Following are some of the accounting standards along with some of the essential points that must be considered while conducting audit of a co-operative society.
– AS 1 Disclosure of Significant Accounting policies
– AS 2 Valuation of Inventories
– AS 3 Cash Flow Statement
– AS 4 Contingent Events & Event after Balance Sheet Date
– AS 5 Prior Period Items & Change in Estimates
– AS 6 Depreciation Accounting
– AS 9 Revenue Recognition
– AS 10 Accounting for Fixed Assets
– AS 14 Accounting for Amalgamation
– AS 15 Employee Benefits
– AS 16 Borrowing Costs
– AS 17 Segment Reporting
– AS 18 Related Party Transactions
– AS 20 Earning Per Share
– AS 22 Accounting for Taxes on Incomes
– AS 26 Intangible Assets
– AS 28 Impairment of Assets
– AS 29 Provision for Contingencies
ACCOUNTING STANDARDS APPLICABLE TO COOPERATIVE SECTOR
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