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

CA Rohit is auditing Bharat Mutual Aid Society, a co-operative society, for the year. He finds that the members' share capital register has not been updated for admissions of the last six months and the society's bye-laws require that no member holds more than a prescribed share limit. What is the most appropriate audit response?

The auditor should examine the bye-laws and the applicable Co-operative Societies Act, verify admissions and shareholding against the prescribed limit, and report any non-compliance. Management representation alone is not sufficient evidence, and bye-laws are central to a co-operative audit.

  1. AIgnore it as bye-laws are internal matters not relevant to the audit
  2. BExamine the bye-laws and the Co-operative Societies Act applicable, verify member admissions and shareholding against the limit, and report any non-complianceCorrect
  3. CRely on the management representation that all admissions were proper and perform no further work
  4. DWithdraw from the engagement since the register is not updated

Explanation

A co-operative society auditor must check compliance with the governing Co-operative Societies Act, rules and bye-laws, including membership and share limits. Relying only on representation is insufficient evidence, and bye-laws are not irrelevant. Withdrawal is an extreme response not required for a records lapse.

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