1.32 Query: Audit of subsequent period’s accounts when preceding period’s accounts have not been considered by the general body.
1. The annual accounts and the balance sheet of a cooperative society for the year ended June 30, 1988, were audited by a chartered accountants’ firm appointed under the Delhi Co-operative Societies Act, 1972, by the Registrar of Cooperative Societies, Delhi. The managing committee of the society issued a notice on January 16, 1989, in terms of section 29 of the Delhi Cooperative Societies Act, 1972, and Rules framed thereunder and the bye-laws of the society for holding the meeting of the general body on February 5, 1989, to consider and adopt the audited accounts of the society for the year ended June 30, 1988.
2. The aforesaid general body meeting was stayed by the orders of the Registrar of Cooperative Societies on the ground that the same by held only after completion of the enquiry already ordered in September, 1988, into the affairs, financial condition etc., of the society under section 55 of the Delhi Cooperative Societies Act, 1972. Though the enquiry had been completed and the findings communicated to the society on December 29, 1989, the aforesaid general body meeting of the members of the society has not been held to date.
3. The Registrar of Societies appointed new auditors for the subsequent year, i.e, the cooperative year ended as on March 31, 1989. They authenticated the balance sheet and profit and loss account for the year ended June 30, 1989, and issued their report thereon in September, 1989. In the notes to accounts, the subsequent auditors have stated that the balance sheet and profit and loss account for the year ended June 30, 1988, had yet not been considered for adoption by the general body.
4. The querist has sought the opinion of the Expert Advisory Committee as to whether the subsequent auditor can authenticate the balance sheet and profit and loss account of the society and issue report thereon if the accounts for the earlier year have not yet been considered by the general body of the society.
Opinion December 8, 1992
1. The Committee notes section 29(1)(c) of the Delhi Cooperative Societies Act, 1972, and rule 42 of the Delhi Cooperative Society Rules, which provide as follows:
“29. Annual General Meeting
1) Every cooperative society shall within a period of six months next after the date fixed for making-up its accounts for the year under the rules for the time being in force, call general meeting of its members for the purpose-
a) …………..
b) ………….
c) Consideration of the audit report and the annual report;”
“42. Closing of Accounts
Every co-operative society shall maintain accounts and books for the purpose of recording business transactions by it and close them every year on the 30th June by 31st July. Each closing entry in the cash book in each ledger account shall be signed by the President, the Secretary and the Treasurer or any other approved members of the society authorised by the managing committee. The closing balances which are thus authenticated shall be carried forward to the following year commencing on the Ist July. For the purposes of calling the annual general body meeting as provided in Section 29, the date fixed for making up the accounts for year shall be 31st July, of each year.”
2. On the basis of the above, the Committee is of the opinion that the society has apparently prepared books of account for the subsequent financial year (i.e, 1988-89) on the basis of the audited balance sheet of the previous year and authenticated balances brought forward from the previous year as per abovesaid provisions of the law. Although the general body of the society has not considered the audit report and accounts of the previous year, the subsequent auditor, appointed by the statutory appointing authority, may rely on the opening balances for the conduct of the audit of the books of account and the balance sheet and profit and loss account prepared on the basis thereof. However, he should, in his report, appropriately draw attention to the fact that the opening balances in the books of account for the relevant year were those appearing in the audited balance sheet of the previous year that has not yet been considered by the general body. Also, in view of the investigation carried out recently into financial affairs of the society and non-holding of the general body meeting, the subsequent auditor should perform his duties with adequate care and skill to ensure that there exists no material irregularity that might have an effect on the truth and fairness of the financial statements. ______________________________ |