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CS Professional · CSR and Social Governance · Financial and Non-financial Reporting of Different Non-Corporate Entities

Shree Sevā Trust, a public charitable trust registered in Maharashtra, receives donations from the public and runs a school. Its trustees ask why the trust must prepare annual accounts and get them audited by a chartered accountant. Which reason best reflects the accountability principle applied to non-corporate entities?

The trust must keep audited accounts because it holds public donations in a fiduciary capacity. Trustees are accountable for showing that funds were applied only for the trust's stated charitable objects, and an independent audit gives stakeholders assurance of this transparency and proper stewardship.

  1. ABecause public funds are held in a fiduciary capacity, trustees must show how the funds were applied for the stated objectsCorrect
  2. BBecause every trust must be converted into a company within five years of registration
  3. CBecause audit is needed only to calculate the trustees' personal remuneration
  4. DBecause accounts are required solely for the purpose of paying stamp duty

Explanation

Trustees hold property for beneficiaries and the public, so they owe a duty to account for receipts and application of funds. Audit gives independent assurance of this. The other options state requirements that do not exist in law or practice.

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