Multi-State Co-operative Societies (MSCS) — with a turnover or deposits above an amount to be specified — will be subject to concurrent audit, the Centre has proposed.
The proposal is part of the Multi State Co-operative Societies (amendment) Bill, 2022, introduced by B. L. Verma, Minister of State for Cooperation in the Lok Sabha on Wednesday.
A concurrent audit would mean that financial transactions are examined systematically to ensure accuracy, authenticity, compliance with procedures and guidelines. The emphasis would not be test checking, but on substantial checking of transactions. The Indian banking system is subjected to concurrent audit in cases where deposits are above a specified amount.
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Recent episodes of financial impropriety by MSCS managements has compelled the government to propose a ‘concurrent audit’, sources said.
The Bill provides for appointment of concurrent auditors from a panel of auditors approved by the central registrar.
MSCS’ in recent years have been plagued by issues regarding trust, with financial scams shaking the trust of depositors.
They were brought under the Prevention of Money Laundering Act, 2002, in 2018. Also, all urban and multi-state cooperative banks were brought under the regulatory ambit of the Reserve Bank of India in 2020.
Besides proposing ‘concurrent audit’, the Bill seeks to reform the composition of the board of MSCS; proposes establishment of a Cooperative Election Authority to bring electoral reforms in the cooperative sector, and establishment of the ‘Cooperative Rehabilitation, Reconstruction and Development Fund’.
G Ramaswamy, former President of the CA Institute, said; “This is a good move to ensure financial discipline. Early warning signals can be given on likely financial misconduct”.