Short Answer

No, a relative of a managing committee member cannot be appointed as the society’s auditor.

Under Section 84 of the Gujarat Cooperative Societies Act, 1961 and Rule 73 of the Gujarat Cooperative Societies Rules, 1965, an auditor must be independent and impartial, and any relationship with the committee or its members creates a conflict of interest, disqualifying the auditor from appointment.

Detailed Explanation

Auditing in a cooperative housing society is intended to ensure transparency, accountability, and fairness in financial management. To preserve the integrity of this process, the Gujarat Cooperative Societies Act, 1961 lays down strict eligibility and disqualification norms for auditors.

• Legal Framework:

Section 84 of the Gujarat Cooperative Societies Act, 1961:

Mandates that every cooperative society’s accounts shall be audited by a certified auditor or a cooperative auditor approved by the Registrar.

The section further emphasizes that the auditor must be independent and free from any personal, financial, or family relationship with members of the managing committee.

Rule 73 of the Gujarat Cooperative Societies Rules, 1965:

Specifies that the appointment of an auditor must be made from the panel approved by the Registrar, and the auditor must not have any direct or indirect interest in the society’s management or affairs.

This means that if an auditor is a relative (by blood, marriage, or close relation) of a managing committee member — for example, a brother, spouse, son, daughter, father, or in-law — that auditor is considered biased and hence disqualified.

• Reason for Disqualification:

The relationship between a committee member and the auditor can lead to:

Conflict of interest in financial reporting.

Compromised independence during audit verification.

Potential suppression of irregularities or misstatements in accounts.

The law ensures that auditors remain neutral evaluators, whose loyalty is to the society as a whole, not to individual committee members.

• Role of the Registrar:

The Registrar of Cooperative Societies has supervisory control over all society audits.

If an auditor is found to have a personal connection with a committee member, the Registrar can:

Cancel the auditor’s appointment.

Disqualify the auditor from future assignments.

Order a re-audit by another certified auditor to ensure transparency.

Any audit report filed by a disqualified or conflicted auditor can be declared invalid and may attract action against both the auditor and the managing committee.

• In practice:

Societies are expected to select auditors from the official list/panel maintained by the Registrar, ensuring no member-relative connection.

The society’s resolution for auditor appointment during the AGM should include a declaration that the auditor has no personal or financial relationship with any committee member.

Real-world Scenarios

Scenario 1: A society in Ahmedabad appointed the treasurer’s cousin as the auditor. During inspection, the Registrar found this violated Rule 73 and ordered a re-audit by an independent auditor.

Scenario 2: In Surat, an auditor who was the secretary’s son-in-law was found to have ignored expense discrepancies. The Registrar nullified the audit report and imposed a fine on both parties.

Scenario 3: A Vadodara society selected an auditor from the approved government panel with no committee relation, ensuring transparency and compliance.

References

Section 84 – Audit of Accounts, Gujarat Cooperative Societies Act, 1961: Official PDF

Rule 73 – Qualifications and Disqualifications of Auditors, Gujarat Cooperative Societies Rules, 1965: Official PDF

Circulars of the Registrar of Cooperative Societies, Government of Gujarat (Audit Standards & Panel List, 2020).