The document provides information on auditing educational institutions, insurance companies, and cooperative societies. It discusses the key tasks of auditors for these different entities. For educational institutions, the auditor should verify items like fees collected, grants, donations, expenses, and assets. For insurance companies, the auditor's duties include examining policies, premiums, claims, investments, and ensuring compliance with insurance laws. Cooperative society audits involve verifying loans, interest, repayments, adherence to by-laws, and reporting irregularities to registrars. The document outlines the specific procedures and checks auditors must perform for each type of audit.

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PRINCIPLES AND PRACTICE OF AUDITING.
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ABHISHEK D K, COMMERCE LECTURER.
UNIT 6:
AUDIT OF EDUCATIONAL INSTITUTIONS, INSURANCE
COMPANIES & CO-OPERATIVE SOCIETIES:
Audit of Educational Institutions (Schools and Colleges):
Introduction:
 Audit of books of educational institutions like school, college, universities, etc. or
other such institutions which are engaged in the educational field is known as audit of
educational institutions.
 Auditor should check Income and Expenditure Account and Balance Sheet of such
institutes in order to verify and report the true and fairness of results presented by
Income Statements and financial position presented by the Balance Sheet.
Generally, the methods and procedures for vouching and auditing are same even though an
auditor of educational institution should perform following tasks:
1. The auditor should go through the University Act. Trust deeds and should note the
rules and regulations relating to accounts. The governing body may pass resolutions
from time to time in respect to accounts. A copy of minutes books should be made
available to him so that he may be able to confirm whether the decision of the
government body have been compiled with.
2. Auditor should obtain a copy of budget or financial statements to stud the different
heads of income and expenditure.
3. Auditor should thoroughly assess the strength of internal check.
4. Auditor should vouch the grant-in-aid from the government carefully.
5. Auditor should verify the receipts of monthly fees from students, from counterfoils or
carbon copy of the receipts. He should also see whether cash received has been
banked daily or not.
6. Other charges from the students such as examination fees, laboratory fees, fines, etc.
should be carefully verified.
7. Any fees received in advance should be properly adjusted.

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8. The concession of fees and other charges should be duly authorized by the proper
authority. Any charges becoming irrecoverable should be written off only after
proper authority has recommended.
9. Any grant-in-aid or funds received for a particular purpose must be utilized for the
same.
10. The donations and other subscriptions from the various authorities have been
accounted for and acknowledged.
11. The income from property, investment, etc., should be properly verified from the
vouchers.
12. Auditor should vouch the amount of salaries paid with the Salary Register. Any
increment given to an employee shall be duly sanctioned.
13. The staff provident fund should be verified and it should be seen that it is invested as
per the rules.
14. The establishment expenses must be carefully vouched and it should be seen that
capital expenditure has not been treated as revenue expenditure or vice versa.
15. The payment of scholarship should be verified with the receipt from students and
Scholarship Register.
16. All the assets and liabilities should be properly exhibited in the Balance Sheet.
17. The stock of equipment, stationery and furniture should be carefully verified.
18. While making payment of staff salaries, income tax should be deducted at source and
shall be duly deposited with the Income Tax Department.
Audit of Insurance Companies:
 According to Section 12 of the Insurance Act of 1938, the Balance Sheet, Revenue
Account, Profit and Loss Account and Profit and Loss Appropriation Account of
every insurance company are audited annually.
 The appointment of statutory auditors in the General Insurance Corporation of India
and its subsidiaries and divisions are made on the advice of the Comptroller and Audit
General of India.
 The auditor is appointed under the provisions of the Companies Act, 1956, and
derives his powers, duties and liabilities from this Act.

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ABHISHEK D K, COMMERCE LECTURER.
Duties of an Auditor:
The first and foremost duty of an auditor is that he must familiar himself with the
following legislations which deals with the insurance business in India and various
aspects of audit:
a. The Insurance Act, 1938.
b. The Insurance Regulatory and Development Act, 1999 and the Amendment Act,
2002.
c. The Companies Act, 1956 and
d. The General Insurance Business (nationalization) Act, 1972.
The auditor should note the following points before starting the audit of accounts of a
General Insurance Company:
1. The auditor should first examine the internal check system in vogue and determine the
extent to which he can rely upon this system.
2. He should ascertain the types of insurance business carried on by the company, since
it is obligatory on the part of the insurance company to maintain a separate account in
respect of each class of business.
3. He should ensure that all the statutory registers as required under Section 14 of the
Insurance Act of 1938 are being maintained and
4. He should examine the procedure with regards to the receipts and payments of cash
and cheque, calculation of premiums, making of loans, buying and selling of
investments, payment of commission to Agents and control of expenses of
management.
5. Under Section 15 of the Insurance Act, 1938, audited accounts and statements are
required to be printed and four copies shall be submitted as returns to the controller of
insurance within six months from the end of the period to which they relate. All these
copies should be signed by the chairman, directors as prescribed and the principal
officer of the company. He should also comply with the provisions of Section 28 (B)
of the Insurance Act.

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6. He should inspect the records of the company in respect of claims, premiums and
commissions.
7. He should inspect the certificates in respect of securities deposits with Reserve Bank
of India.
8. He should ensure that separate accounts and proper registers have been maintained
and the annual accounts are prepared in accordance with the Insurance Act and
Companies Act.
9. He should verify premium receipts with the policy registers and the premium registers
and check the accounts for such receipts.
10. He should verify the investments and the income thereon.
11. He should vouch the claims paid by reference to claims register and other
documentary evidences. Claims not paid shall be shown as liabilities.
12. He should verify commission, allowance and bonus paid.
13. He should ensure that all expenses incurred in setting the claims have been debited to
claims account and different expenses are appropriated in different heads. He should
also check all payment of annuities.
14. He should check re-insurance account, verify assets and liabilities and provisions
made for unexpired risk.
Audit of Revenue Account and Balance Sheet items:
The duties of an auditor in an insurance company with regard to Revenue Account and
Balance Sheet items are as follows:
a. Premium.
b. Claims.
c. Commission.
d. Management expenses.
e. Investments.
f. Cash and Bank balance.
g. Management Report.

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ABHISHEK D K, COMMERCE LECTURER.
Audit of Co-operative Societies:
 The Co-operative Societies are established under the Co-operative Societies Act of
1912.
 The accounts of co-operative institutions are generally audited by the staff of the co-
operative department.
 However, in other cases, a practicing Chartered Accountant may also be invited to do
the audit work. Such an auditor is appointed by the Registrar of Co-operative
Societies.
 The auditor should have full knowledge of the particular Co-operative Societies Act,
under which the Co-operative Society under audit is functioning.
 He must also study the bye-laws of the society and confirm that all the amendments
made from time to time in bye-laws have been duly registered with the office of the
Registrar of the Co-operative Societies.
Provisions of Co-operative Audit:
The following points should be kept in mind in connection with the audit of a Co-operative
Society:
I. Qualification of Auditors:
i. A Chartered Accountant within the meaning of the Chartered Accountants
Act-1949, Or
ii. A person who holds a government diploma in Co-operative Accounts or in
Co-operation and Accountancy.
iii. A person who has served as an Auditor in the Co-operative Society
department of the State Government and whose name has been included by the
Registrar on the Panel of Certified Auditors maintained and published by him
in the Official Gazette at least once, every year.
II. Appointment of the Auditor:
i. The appointment of an Auditor is done by Registrar of Co-operative Societies.
ii. The Auditor conducts his audit on behalf of the Registrar.

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iii. The Audit fees is paid by Co-operative Society according to the statutory scale
of fees prescribed by the Registrar in this regard according the category of
society.
iv. The Auditor is required to submit his Audit Report directly to the Registrar
and one copy of the Audit Report is submitted to the concerned society.
III. Books, Accounts and other records of Co-operative Societies:
Under section 43 (h) of the Co-operative Societies Act, a state government can frame
rules prescribing the books and accounts to be kept by a co-operative society.
Special features of Co-operative Audit:
The special features of co-operative audit, to be borne in mind in general while conducting
the audit are as follows:
1. Examination of Overdue Debts:
An Auditor has to examine and classify overdue debts-
 from six months to five years and,
 overdue above five years in two categories and shall have to report it in his
audit report.
2. Overdue Interest:
While calculating the profit of Co-operative Society, overdue amount of interest
outstanding should be excluded.
3. Certification of Bad Debts:
As per Rule No. 49 of the Maharashtra State Co-operative Rules, 1961, it is very
interesting to note that no bad debts can be written off unless they are certified as bad
debts by the Auditor. Where no such requirement of law exists, the managing
committee of the society must authorize the write off.
4. Valuation of Assets and Liabilities:
General Principles of Accounting and Auditing Conventions and Standards are
adopted at the time of valuation of assets and liabilities. No specific provisions or
instructions under the Act and Rules are provided.

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5. Adherence to Co-operative Principles:
An Auditor should ascertain how far the objectives, for which the Co-operative
Society is set up, have been achieved in course of its working. It is not necessarily in
terms of profit, but in terms of extending of benefits to members who have formed the
Society.
6. Observation of the Provisions of the Act and Rules:
An Auditor should be well versed with the Provisions of the Act and Rules of the Co-
operative Society and the by-laws thereof. It the Auditor finds any irregularity, it
should be immediately assessed and reported to the next level.
7. Verification of Members’ Register and examination of their Pass Books:
This is essential especially in Rural and Agricultural Credit Society where members
are illiterate, the Auditor should verify the Pass Book and Members’ Register to
verify the amount of loan granted and their repayments. It will help to ensure that the
books of accounts are free from any manipulation.
8. Special Report to the Registrar:
During audit, if any irregularities are found by the Auditor, that should be reported to
the Registrar and an appropriate action may be taken by the Registrar against the
society.
9. Audit classification of Society:
After assessing the overall performance, an Auditor has to award a class to the society.
Judgement of Auditor should be based on the criteria fixed by the Registrar. The
Auditor should be very careful when making decisions related to the classes in the
society. If management is not satisfied by the award, he may file an appeal to the
Registrar and the Registrar may direct to review the audit classification.
10. Discussion on Audit Draft:
After completion of audit, minor irregularities may be settled and rectified. The Audit
Report can never be finalized without discussing with the Managing Committee.
Rights of Co-operative Auditors:
i. As per Section 17, an auditor can access all the books, accounts, documents and
securities of the society.

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ii. He has to see that Balance Sheet of the society shows a true and fair view of a
business according to information and explanation given to him.
iii. Every officer of the society is bound to give all information regarding working and
transactions of the society.
Duties of Co-operative Auditors:
An Auditor needs to consider the following points to be able to perform his duties in an
efficient way:
i. An Auditor should be well-versed with the Co-operative Society Act, 1912
and the by-laws of the society.
ii. If there is any type of irregularities and improprieties found by an Auditor
during his audit regarding Co-operative Societies Act, 1912 and by-laws, he
should immediately point out the same.
iii. An Auditor should be well aware of power of officers regarding loan,
investment, borrowings, advancing of the funds.
iv. He should thoroughly check and vouch the cash book and bank book.
v. An Auditor should ascertain that how many shares are held by each member
of the society, for this, he should check the membership registers.
vi. An Auditor should check all the receipts and payments of the society
according to standard auditing practice.
vii. He should go through the agreements between society and borrower to check
the interest due on loan and repayment schedule. An Auditor should also
check and compare the actual interest received and the repayment of loan
received with dues from them.
viii. He should carefully vouch and verify the loan given to members of the society
is according to agreement, regulation and resolution passed by the Managing
Committee of the society or not.
ix. An Auditor has to assure that a loan given to a non-member is not without the
permission of the Registrar.
x. He should verify the loan given by Co-operative Bank should be according to
the prescribed limit.

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xi. An Auditor should physically examine and verify the assets of a society.
xii. He should adopt different methods for different kinds of societies.
xiii. Balance Sheet, Profit and Loss Account and Auditor Report should be
according to the proforma given by Chief Auditor of the Co-operative Society
of the State.
xiv. Accounts should be according to the Co-operative Society Act and also with
the provisions of Income Tax Act.
xv. All the assets, expenses, incomes, cash-in-hand, etc. should be vouched and
verified according to standard accounting procedures and principles.
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