1.16     Query

Problems Arising from the Audit

of Co-operative Banks.

1.The co-operative bank of which X.Y. & C., Chartered Accountants, were appointed auditors for the year 1967-68, was                             requested to provide them with the following: -

            (a)            A copy of the by-laws as amended to-date duly certified by the Secretary.

            (b)            A copy of the previous year’s Audited Accounts and Auditor’s report thereon.

(c)        Lists of Schedules of Shareholders, Savings Bank Accounts, Fixed Deposit Accounts, Borrowers and Outstanding Assets and Liabilities of the previous year to enable them to check the opening balances.

2.Draft Accounts for 1967-68 together with the lists of balances of shareholders, savings bank accounts, fixed deposit  accounts, borrowers (loans) and Outstanding Assets and Liabilities as on 30.6.68.

3.Once they were invited to take up an audit, whether they are entitled to inspection of all the Books and Records Opinion whenever they required them in connection with the Audit?

4. Whether an Auditor is entitled to collect information and explanations (except policy matters) from the persons who maintained the books of accounts and get mistakes in posting or casting corrected by the persons who wrote up the particular book in which the mistake was found out?

                                                                  Opinion                                                 July 21, 1969

The auditor is entitled to a copy of the Bye-laws of the Bank as amended up-to-date duly certified as a true copy by the Secretary. He is also similarly entitled to a certified copy of the previous year’s audited accounts with the auditor’s report thereon. With reference to the other lists and schedules, for example, those relating to shareholders, savings bank accounts, fixed deposit accounts, list of borrowers, outstanding assets and liabilities etc., whether relating to the current year or the previous year, there appears to be no basic requirement under which the Bank can be legally compelled to furnish a copy of the auditor for his record, although, in actual practice, this is customarily done. If, however, the auditor has himself prepared these lists and schedules etc. from the records furnished by the Bank, he may retain them as part of his working papers.

The auditor is entitled to inspection of all the books and records whenever required in connection with his audit.  Normally, such inspection should be limited to the working hours – as distinct from the banking hours – of the Bank, subject to mutual adjustment having regard to the bank’s own requirement of books for its own business during banking hours. The auditor is entitled to inspect the books and records at any time and is not obliged to give prior notice to the Secretary about the books which he would need for his inspection on the following day.

The right of the auditor to obtain information and explanations is normally to be exercised by discussion with the management and the officers of the Bank, though in actual practice on-the-spot discussion with the clerical staff is both useful and customary.

So far as the errors detected by the auditor are concerned, he may certainly report the matter to the management, but he has no right or authority to amend the accounts or to insist on their correction. He has merely to determine in his own mind whether he would be prepared to certify those accounts with or without qualification, having regard to the materiality of the error, its effect upon the accounts, and other similar matters.

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