Short Answer

Societies are required to have both internal audits and external statutory audits.

Detailed Explanation

Section 81 of the Gujarat Cooperative Societies Act, 1961 mandates that every society shall have an internal audit system. This means that societies must conduct regular internal audits to ensure proper financial management, compliance with laws, and efficient operations. Internal audits are conducted by internal auditors appointed by the society to review financial records, transactions, and internal controls.

Rule 72 of the Gujarat Cooperative Societies Rules, 1965 further elaborates on the internal audit requirements. It states that the internal auditor shall submit a report to the society's committee at regular intervals, highlighting any discrepancies, non-compliance issues, or areas for improvement. This report helps the society in identifying and rectifying internal control weaknesses and financial irregularities.

On the other hand, external statutory audits are also mandatory for societies as per Section 81 of the Act. External audits are conducted by independent auditors appointed by the Registrar of Cooperative Societies to provide an unbiased opinion on the society's financial statements and compliance with legal requirements. External audits help in enhancing transparency, accountability, and credibility of the society's financial reporting.

In practice, societies should ensure the presence of both internal and external audit mechanisms to maintain financial discipline, transparency, and accountability. Internal audits help in internal control assessment and risk management, while external audits provide assurance to stakeholders regarding the accuracy and reliability of financial information.

Practical Examples

• Scenario 1: A cooperative housing society appoints an internal auditor to review its financial transactions, cash flows, and compliance with cooperative laws on a quarterly basis.

• Scenario 2: A cooperative credit society conducts an external statutory audit annually to verify the accuracy of its financial statements and compliance with auditing standards.

• Scenario 3: A cooperative marketing society establishes an audit committee comprising members responsible for overseeing both internal and external audit processes to ensure comprehensive financial oversight.

References

• Section 81 of the Gujarat Cooperative Societies Act, 1961

• Rule 72 of the Gujarat Cooperative Societies Rules, 1965