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

CA Tanvi audits Sunrise Cooperative Credit Society and finds that the society's bye-laws require an annual audit and that the audit is mandated by the state cooperative societies Act, with the auditor being selected from a panel approved by the Registrar. The society's management asks her to add, in the audit report, an opinion on whether the society's loans to members comply with the Registrar's lending guidelines. Which response is MOST appropriate?

The auditor should report on compliance with lending guidelines where the governing cooperative Act, rules or engagement terms require it, and only after performing sufficient procedures. Audit of a cooperative society is statute-driven, so neither fee consideration nor reliance only on the society's own loan register is an appropriate basis.

1. ADecline to report on it, since the Registrar's guidelines are outside the scope of any audit of a cooperative society
2. BInclude the opinion only if the managing committee agrees to pay additional fees
3. CReport on the compliance only if the governing statute or the terms of engagement require it, and perform sufficient procedures to support the conclusion, as the audit of a cooperative society is driven by its governing Act and rulesCorrect
4. DGive the opinion based solely on the loan register maintained by the society