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CCONPO Requests to Comments on Draft Checklist for Audit of Societies.
February, 13th 2013
                  CHECKLIST FOR AUDIT OF SOCIETIES
Sr.                           Particulars
No.

       PART ­ A ­ ADMINISTRATIVE

1      Whether previous audit paras are actually resolved in full
       or not ?
2      Does the society have a copy of Societies Act, Rules and
       Regulations ?
 (a)   Whether rules and regulations are changed without
       authorisation ?
 (b)   Whether changes in rules and regulations suggested by
       co-operative department from time to time are
       incorporated or not ?
3      Whether working of the society is as per the rules and
       regulations. If not then give the details.
4      Name of the union under which society is registered as a
       member.

       If not, then give reasons
5      Has application from the new members been taken ?

       Whether the Management Committee has approved said
       application ?

       Has name of new members been entered in the members
       register ?

       Whether new members have been entered as per the
       rules ?
6      Whether the expulsion of any member is as per the rules
       and regulations and details of which are entered in the
       member's register.
7      Whether share certificates are issued to all the members
       and tallied the same with the register.
8      Is society's Annual General Meeting (AGM) held ?
           a) If yes, whether it was conducted as per the rules ?
           b) Date of AGM
9      Number of Management Committee meetings held during
       the audit period.

       Whether members of committee have attended meeting
       regularly ?

       Whether committee has undertaken steps to expel
       members who have not attended 3 consecutive meetings
       ?
10     Is there any amount to be recovered from the members of
       the management committee ?

       If yes, unpaid since which period and what amount ?

       Whether any action is taken by the society against such
       member ?
11   Has management committee passed any resolution
     against rules and regulations ? If yes, extent of
     implementation
12   Are there any dues from staff to the society ?

     If yes, give the details of over dues.




     Details of steps taken by the society.
13   Has society made any provision for Provident Fund for its
     employees ?

     Whether amount of Provident Fund is kept separately
     from other investments ?
14   Has the management committee fixed the responsibility
     and limit of cash and stock of materials by way of
     resolution ?

     If yes, whether proper guarantee has been taken or not ?

     Have letters of guarantee been kept in proper custody ?
15      (a) Give the date and amount of physical verification
            of cash.

            Whether it tallies with the book balance ?

            Report deficiency, if any.

        (b) Verify material and coupon stock.

            Whether it tallies with the book balance ?

            Report deficiency, if any

        (c) Whether society has taken insurance policy for
            cash balance and stock ?

        (d) Is cash maintained in effective joint custody of two
            or more officials ?

        (e) Have the cash balances at the society been
            checked at periodic intervals and the same has
            been properly documented ?
16   Whether society maintains the books of accounts and
     administrative records as per the rules and regulations ?

     Report the books or records not maintained (with
     reasons).
17   Whether administrative expenses of society are in
     proportion to the activity undertaken by it ?

     Report percentage of administrative expenses to its
     working capital fund.
18   Has society taken loans or advances in contravention of
     rules and regulations ?
19   Has society taken any loan or share capital contribution
     from Government ?
     If yes, specify the purpose and amount.

     Whether the loan is utilized for the specified purpose ?
20   Has society received any government subsidy ?

     If yes, whether the same is used for the specified purpose
     only ?
21   Give the details of amount of share capital returned and
     number of members to whom such capital is returned
     during the year.

     Whether shares returned are as per the rules and
     regulations ?

     Give the reasons for shares returned.
22   What is the net profit during the year ?

     Whether the distribution of net profit is as per the rules
     and regulations ?
23   Whether depreciation is calculated on dead stock and
     fixed assets as per rules and regulations ?
24   Whether fixed assets register is maintained ?
25   Whether confirmation of balances are obtained from
     debtors ?
26   Give the total amount of Society's debts out of which ­

        a) Bad debt
        b) Doubtful

     Whether any provision has been made for such debt ?

     Steps taken to recover the same.
27   Whether balances in accounts of society are tallied with
     those as per the bank, Union and other parties ?
28   In case any books of account are maintained manually,
     does general scrutiny thereof indicate whether they have
     been properly maintained with balances duly inked out
     and authenticated by the authorized signatories ?
29   In respect of society, having computerized accounts ­

     Whether hard copies of accounts are printed regularly ?

     Indicate the extent of computerization and the areas of
     operation covered

     Whether regular back-ups of accounts and off-site
     storage are maintained ?

     Whether adequate contingency and disaster recovery
     plans are in place for loss / encryption of data ?

     Do you have any suggestions for the improvement in the
     system with regard to computerized operations of the
     branch ?
30   Have you found any permanent or temporary irregularity
     in financial or administrative matter during the course of
     audit ? If yes in which quarter.
     PART ­ B ­ BUSINESS

1    Whether society sends the collected milk to the union or
     disposes otherwise ?
2    Whether dairy register is approved by the committee after
     its completion ?
3    What is the normal difference between the test conducted
     by the society and test reported by the union in quality of
     milk
4    What is the excess quantity of milk reported by the union
     while receiving milk from the society as compared to the
     quantity dispatched by the society ?

     If such excess is lower than three percentages, give the
     reasons.
5    What is the normal time for making payment to milk
     suppliers ?

     Please report the flaw, if any, in the payment system.
6    What system is adopted for local milk sale ?

     Report the defects, if any, in the system.
7    What is the system for the sample milk sale ?

     Is the system satisfactory ?
8    What is the system of disposal of surplus stock of milk ?

     (surplus stock = Quantity of milk procured.
              Less : Local sales.
              Less : Quantity of milk sent to union)

     Is the system of disposal reasonable ?

     Report, if prejudicial to the interest of the society.
9    What is the normal profit margin in sales ­ purchase
     transactions of milk ?




     Whether trading profit derived after making payment to
     the members of the society and after receiving the rate
     difference is reasonable ? If not, give the reasons.
10   Give the reasons, if there is any delay in payment of rate
     difference, bonus and dividend to the members of the
     society.
11   Whether society has carried out dealings in other
     products ?

     Whether such transactions are as per the rules ?

     Whether such dealings are in benefit of the society ? If
     not give the reasons.
12   Have loans been given to milk suppliers ?

     Whether credit appraisal is verified ?

     Has adequate security been taken ?
13    Have insurance policies been taken for members'
      livestock ?

      Please report under whose name policies have been
      taken.
14    Are there any technical defects in administration and
      operations of the society ? If yes, report




      PART ­ C ­ FINANCE AUDIT

Sr.                           Particulars
No.
1     Are there any unpaid dues from employee to the Union ?

      If yes, give the details of overdue

      Details of steps taken by the Union
2     Has Union set up staff provident fund, gratuity fund and
      superannuation fund for its employees ?

      Have rules been accepted for such fund ?

      Whether amount of contribution is kept separately ?

      If separate fund is established, give the details
3     Has adequate guarantee been taken from employees
      handling cash and inventory ?

      Is guarantee in proper custody ?

      Whether the same has been timely invoked in case
      required.
4     Does the Union hold adequate insurance cover for
      building, plant & machinery, vehicles, stock, chilling
      centre, livestock and cash on hand ?

      Is policy being renewed regularly ?
5     Whether union has prepared budget and the same has
      been approved in the AGM ?

      Is there material variance between actual income and
      expenses with budgeted income and expenses ?

      Whether revised budget, if any, is approved ?
6     Is cash maintained in effective joint custody of two
      officials ?

      Has committee passed resolution for nominating officials
      for custody of the cash ? If yes, provide resolution No.
      and its date.

      Has any limit been fixed for keeping cash on hand ?

      Whether cash on hand is kept in excess of the limit for a
      long time ?
        If yes, obtain the explanation from the Management
        Committee
7       Whether physical verification of cash was carried out ?
        Whether the same was tallied with cashbook ? Put a sign
        in the cash book and give the details of the officers of the
        union remain present.
8(a)    Has union taken borrowing or deposits ?

        Give the interest rate on deposits. Whether interest rate is
        higher than bank rate ? If yes, give reasons.
8 (b)   Has union borrowed money from the government or other
        agency ? If yes, give the amount of borrowing and
        purpose.

        Has borrowed fund been used for the purpose for which it
        was taken ?

        Has required agreement been executed ?

        Have terms of the borrowing been complied ?

        Whether instalments are regularly paid ?
8 (c)   Has union received subsidy from the government or other
        agency ?

        Has subsidy been used for the purpose for which it was
        received ? If not, obtain explanation.
9       Whether Union has invested securities of other entities ?

        Whether investment register has been maintained ?

        Whether the same tallies with the General Ledger ?

        Whether dividend / interest on the investment has been
        received and properly credited ?
10      What is the profit / loss of the union in last Accounting
        Year.

        Has Profit & Loss Account been prepared as per rules
        and regulation ? Give deficiency if any.

        Has approval of general meeting been obtained for
        distribution of profit ?

        Whether distribution of profit is as per the rules and
        regulation ?

           1) Reserve Fund
           2) Education Fund
           3) Dividend
           4) ......
           5) ......
11      Give the dividend rate declared by the union

        Whether General Meeting has increased dividend rate
        recommended by the Management Committee ? If yes,
        whether it was as per the rules ?
12        System of Accounts & Financial Control
     1.   Whether the duties and responsibilities including the
          delegation of powers at various levels of management
          have been adequately defined ?
     2.   Examine the systems of accounts and financial control
          being followed by the union and give your views as
          regards their deficiencies alongwith suggestions for
          remedial measures.
     3.   Have you noticed any weaknesses in the internal control
          system ? If yes, the same may be highlighted.
     4.   State whether the management has taken remedial action
          on remarks in last 3 years Auditor's report ?
     5.   Whether the union has a clear credit policy for providing
          for doubtful debts / write offs ?
     6.   Please report whether the system of giving discount to
          promote sales is fair ? Whether the instructions for
          allowing discount are issued in writing and communicated
          properly to sales outlets.
     7.   Examine and indicate whether the union has a system of
          monitoring the timely recovery of outstanding dues ?
          Highlight the significant instances of failure of the system,
          if any.
     8.   Whether confirmation of balances from debtors are
          obtained ?
     9.   Examine and comment upon the reasonableness of
          assumptions made by the Actuary in providing for
          retirement benefits in the form of gratuity, leave
          encashment, etc as per Accounting Standard-15
          prescribed by the Institute of Chartered Accountants of
          India
13        Assets (including inventory)
     1    Whether fixed assets register is maintained properly ?
     2    Whether capitalization of assets done on due dates ?
     3    Examine and comment on the system of valuation of fixed
          assets
      4   Does the work in progress contain any item, which has
          remained unadjusted, for an unduly long time ? Attach list
          of such items indicating amount, period of pendency and
          reasons.
      5   Whether the system made for the purposes of control
          over inventory, including stocktaking and valuation of
          inventory at the end of financial year are adequate and
          duly enforced ?
      6   Examine and comment on the system of physical
          verification, valuation, treatment of non-moving and slow
          moving items, their disposal and abnormal excess and
          shortages in respect of closing stock items.
      7   List out the surplus / obsolete/non-moving items of stores,
          raw material, finished goods lying unused at the end of
          last 3 years.
      8   Examine whether the union has prescribed the following
          with regard to management of inventory ?

             a) Maximum and minimum limits of stores and
                spares, etc.

             b) Economic order quantity for procurement of
              stores.
   9 Whether proper records are maintained for inventories
     lying with third parties and assets received as gift from
     government or other authorities.
14   Costing
   1 Whether cost records is maintained ?
   2 Are the cost accounts being reconciled with financial
     accounts ?
   3 Whether the union has an effective system for
     identification of idle labour hours and idle machine ­
     hours ?
   4 Examine the accounting treatment of rejections and
     scraps for determination of cost of production.
15   Internal Audit
   1 Whether union is having internal audit system ?
   2 Whether internal audit manual / guidelines have been
     prescribed and whether the same are being followed ?
   3 Give your comments on the internal audit system stating
     whether its reporting status, scope of work, level of
     competence, etc. are adequate ? If not, describe the
     shortcomings thereof.
   4 Is there an adequate compliance mechanism on internal
     audit observations ?
16   EDP Audit
   1 Whether the organization has an approved IT strategy or
     plan ?
   2 If the union has computerized its operations or part of it,
     assess and report, how much of the data in the union is in
     electronic format, which of the major areas such as
     Financial Accounting, Sales Accounting, Personnel
     Information, Payroll, Materials / Inventory Management,
     etc. have been computerized.
   3 Indicate how this impacts on your work of auditing the
     Accounts and whether your audit is through or around the
     computer.
   4 Has be union evolved proper security policy for Software /
     Hardware ?
   5 Identify the areas in which the auditor is of the view that
     the built-in checks in the computer environment need to
     be reviewed. Also mention the percentage of acceptable
     audit risk in those identified areas.
   6 Report on the existence of a system of proper
     documentation of software programs
   7 Whether adequate contingency and disaster recovery
     plants are in place for loss of data ?
 
 
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