what are the effect of auditing in cooperative development

Asked June 29, 2016, 10:51 AM EDT

Maybe post it here.

Outside United States cooperatives

1 Response

The incorporation statues for most cooperatives and the cooperative's articles of incorporation and bylaws typically mandates that an audit be conducted annual and the results presented to the membership. Members clearly have a right to information about the financial status and performance of their cooperative so the annual audit is an important function. The audit is a board responsibility and it is the board that actually engages the auditor. The manager is obviously heavily involved in working with the auditor which leads some boards to be under-engaged in the process. Ideally, the cooperative should have an audit committee, which is usually a sub-committee of the board. In many cases the full board serves as the audit committee. That is logical if the cooperative has a relatively small board but a full board committee may be less likely to formally define their functions and goals for the audit. Some cooperatives ask non-board members to serve on the audit committee. That is a good tool for getting a member involved in the cooperative but it does raise confidentiality issues.

In terms of new cooperative development, an annual audit is clearly an important standard operating procedures. The cooperative leaders should be sure that they select an auditor who is familiar with the cooperative business model and its unique issues. I am not aware of many auditing professionals being involved in the cooperative formation process.