In our society, based in Mumbai, AGM approval was taken for appointment of auditor X for then current year. This was also recorded in AGM Minutes circulated by the Secretary. However, the accounts were audited by Auditor Y. There was no intimation by the MC to members for change of Statutory Auditor nor anything to this effect was recorded in the audited accounts of the society.
My query is whether such abrupt and sudden change in Statutory Auditor appointed by AGM can be made by MC or the Secretary? Whether MC should have taken prior approval of Registrar or intimated Registrar? Whether such audited accounts without approval of or intimation to Registrar are valid in the eyes of law?
I look forward to your response and guidance Sir!
I C Naik
For answering this question one has to look at all the provisions concerning auditor of a cooperative housing society.
These provisions are in Chapter VIII – AUDIT, INQUIRY, INSPECTION AND SUPERVISION s81-s90 of the MCS Act 1960 Rules 69 of the MCR 1961 also provides for procedural requirements.
“(1) (a) The society shall cause to be audited its accounts… by auditor or auditing firm from a panel prepared by the Registrar and approved by the State Government or an authority authorized by it in this behalf, …….. appointed by the general body of a society, as provided in sub-section (2A) of section 75”
Provided further that, no auditor shall accept audit of more than twenty societies for audit in a financial year excluding societies having paid up share capital of less than rupees one lakh :
( 5B) The auditor shall submit his audit report within a period of one month from its completion and in any case before issuance of notice of the annual general body meetingto the society and to the Registrar in such form as may be specified by the Registrar
Additionally Section 75 of the MCS Act 1960 provides:
(2A) Every society shall, appoint an auditor or auditing firm from a panel approved by the State Government in this behalf in its annual general body meeting having such minimum qualifications and experience as laid down in section 81, for the current financial year and shall also file in the form of return to the Registrar, the name of the auditor appointed and his written consent for auditing the accounts of the society within a period of thirty days from the date of the annual general body meeting :
Provided that, the same auditor shall not be appointed for more than three consecutive years by the annual general body meeting of the same society.
The MCR 1961
Rule 69. Procedure for appointment of auditors for conducting audit.—(1) (a) The audit of accounts of the societies shall be conducted by the auditor or auditing firm appointed by the society in its annual general body meeting within the period specified in the Act, from the panel of auditing firms or auditors approved by the State Government or authority authorized in this behalf.
(b) Audit of the society shall be completed within four months from the close of the financial year and the report, also in Compact Disc shall be submitted to the society and the Registrar as specified in sub-section
(5B) of section 81 of the Act, and also Part A of audit report, audit certificate and audited financial statements shall be uploaded by auditor on official website of Co-operation Department :
(d) Before appointing the auditor or the auditing firm, the society shall ensure that, the auditor or the auditing firm proposed to be appointed for conducting its audit has not accepted the societies for audit exceeding the limit prescribed under the Act.
- f) Before appointing the auditor, the society shall ensure that, the auditor or the auditing firm proposed to be appointed for conducting its audit has not accepted the societies for audit exceeding the limit prescribed under the Act.
(i) The criteria for retention or removal of the name of auditor from the panel shall be as follows.—
(i) non-submission of audit report as specified in sub-section (5B) of section 81, to the society and the Registrar within the period of one month from the date of completion and in any case before the issuance of notice of the general body meeting ;
(iii) after giving consent for audit by the auditor or auditing firm and after issuance of order of appointment of auditor or auditing firm, audit is not completed within stipulated period as specified in sub-section (1) of section 81 ;
Assuming you have given all facts accurately my observation is as under:
If the above extracts are gone through carefully , it will be very clear that the Society and both the auditors are guilty of violation of law as also Rules. The Secretary/Chairman are liable to be disqualified for 5 years to join the Management Committee of any cooperative society. The auditors are liable to be removed from the panel maintained by the Registrar. The ICAI can also cancel the audit practice certificates of both the auditors.
It is not difficult to find out details of violations. These violations are easy to prove as they are based on facts on records.