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CA Intermediate · Auditing and Ethics · Special Features of Audit of Different Type of Entities

CA Meera is auditing Lakshmi Co-operative Urban Credit Society for the first time. She wants to identify the law that governs the audit and the appointment of the auditor. Which statement is correct?

The audit of a co-operative society is governed by the Co-operative Societies Act under which it is registered, along with its rules and bye-laws. The auditor must be appointed as that law prescribes, such as from an approved panel. The Companies Act, 2013 does not apply merely because the society has share capital.

  1. AThe audit is governed by the Companies Act, 2013, as the society has share capital
  2. BThe audit is governed by the Co-operative Societies Act applicable to the society and its rules, and the auditor must be appointed from the panel or as that law prescribesCorrect
  3. CThe auditor is appointed freely by the members without reference to any law
  4. DNo audit is needed for a co-operative society with fewer than 500 members

Explanation

A co-operative society is incorporated under the relevant Co-operative Societies Act (State Act or Multi-State Act), and audit, auditor qualification and appointment follow that Act and its rules. The Companies Act, 2013 does not govern it merely because it has share capital. The member-count exemption is invented.

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