Short Answer

Yes, members can hold the auditor accountable if they are negligent.

Detailed Explanation

Section 81 of the Gujarat Cooperative Societies Act, 1961 states that the auditor of a cooperative society shall be accountable for any misfeasance, breach of trust, or negligence in the performance of their duties. This means that if an auditor fails to perform their duties diligently or with care, leading to financial losses or mismanagement, the members have the right to hold them accountable. In practice, if members believe that the auditor has been negligent in conducting the audit or has overlooked important financial discrepancies, they can take legal action against the auditor.

Furthermore, Rule 74 of the Gujarat Cooperative Societies Rules, 1965 specifies the procedure for the removal of an auditor. If members are dissatisfied with the auditor's performance and suspect negligence, they can convene a general meeting and pass a resolution for the removal of the auditor. Subsequently, a new auditor can be appointed to rectify any errors or oversights made by the previous auditor.

Practical Examples

• In a cooperative society, the members discover significant financial irregularities that were not highlighted in the audit report. Upon further investigation, it is revealed that the auditor failed to thoroughly examine the financial records, leading to the oversight of these irregularities. In this case, the members can hold the auditor accountable for negligence under Section 81 of the Act.

• A cooperative society faces financial losses due to mismanagement of funds, which were not identified in the audit conducted by the appointed auditor. The members suspect that the auditor did not exercise due diligence in reviewing the financial transactions, resulting in the failure to detect the mismanagement. As a result, the members decide to take legal action against the auditor for negligence.

• During an audit of a cooperative society, the auditor overlooks discrepancies in the financial statements that later result in financial harm to the society. The members, upon discovering this oversight, decide to follow the procedure outlined in Rule 74 of the Rules to remove the negligent auditor and appoint a new auditor to rectify the errors.

References

• Section 81 of the Gujarat Cooperative Societies Act, 1961: Official PDF

• Rule 74 of the Gujarat Cooperative Societies Rules, 1965: Official PDF