Empanelment of Chartered Accountant Firms for Co-Operative Audits: Interpreting Experience Criteria Under Section 63(20)(ii)

Introduction

The Karnataka State Chartered Accountants Association (KSCAA) has made a detailed representation to the Department of Co-Operative Audit regarding how eligibility should be determined for Chartered Accountant firms seeking empanelment under Section 63(3) read with Section 63(20)(ii) of the Karnataka Co-Operative Societies Act, 1959.

The central issue highlighted is whether the statutory requirement of “at least three years in auditing” ought to be evaluated based purely on the age or continuity of the present firm constitution, or whether it should be linked to the actual professional experience of the partners or proprietor who conduct and certify the audits.

KSCAA has urged that the latter, more purposive interpretation be adopted so that competent and experienced professionals are not excluded merely because their firms are newly constituted or recently reconstituted.

Context and Scope of the Representation

KSCAA, a body representing Chartered Accountants across Karnataka since 1957, regularly interacts with government departments, regulators and other authorities on issues impacting the profession and public interest. In this instance, KSCAA has approached:

The Director, Department of Co-Operative Audit, #17, Jaya Nivasa, Shenker Mutt Road, Basavanagudi, Bengaluru — 560004, vide Notification No: 012/2025-26 dated 09 June 2026

The representation specifically concerns:

• Empanelment and re-empanelment of Chartered Accountant firms in the panel maintained by the Department of Co-Operative Audit
• The interpretation of eligibility conditions under Section 63(3) read with Section 63(20)(ii) of the Karnataka Co-Operative Societies Act, 1959
• Treatment of reconstituted firms and newly formed firms that may not, in their current constitution, have existed for three years, but whose partners possess substantial audit experience

Statutory Provision: Meaning of “Auditing firm”

For ready reference, Section 63(20)(ii) of the Karnataka Co-Operative Societies Act, 1959 defines an “auditing firm” in the following terms (retained verbatim as per statute):

“Auditing firm” means a firm of more than one Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 [or a firm of more than one Cost Accountant within the meaning of the Cost and Works Accountants Act, 1959] who or which shall have a fair knowledge of the functioning of the co-operative societies and shall have an experience of at least three years in auditing of which the auditing firm would like to be included in the panel and Chartered Accountants shall have working knowledge of the Kannada language.

The present controversy arises from how the portion “shall have an experience of at least three years in auditing” should be understood when a firm has undergone reconstitution or is recently formed with experienced partners.

Emerging Practical Issue: Non-Consideration of New/Reconstituted Firms

Observed Departmental Practice

According to KSCAA, several applications made by newly constituted or reconstituted firms have been rejected or not taken forward, solely on the ground that the current constitution of the firm itself is less than three years old.