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CRED 14 Annex 1 Accounts and audit - Friendly and Industrial and Provident Societies Act 1968

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1Introduction

1.

The Friendly and Industrial and Provident Societies Act 1968 applies to industrial and provident societies in general. The following is an outline of the main provisions relating to credit unions, which are a special type of industrial and provident society.

Books of account

2.

Section 1(1) of the Friendly and Industrial and Provident Societies Act 1968 provides that every credit union is to:

(1)

cause to be kept proper books of account with respect to its transactions and its assets and liabilities;

(2)

establish and maintain a satisfactory system of control of its books of account, its cash holdings and all its receipts and remittances.

General provisions as to accounts and balance sheets

3.

Section 3 of the Friendly and Industrial and Provident Societies Act 1968 provides that every revenue account and balance sheet of a credit union is to give a true and fair view.

Publication of accounts

4.

Section 3A of the Friendly and Industrial and Provident Societies Act 1968 provides that a credit union is not to publish any revenue account or balance sheet unless:

(1)

it has been signed by the credit union's secretary and two members of its committee;

(2)

it has been previously audited by the auditors;

(3)

it incorporates a report by the auditors as to whether the revenue account and balance sheet give a true and fair view.

Re-appointment and removal of qualified auditors

5.

Section 5(1) of the Friendly and Industrial and Provident Societies Act 1968 provides that a qualified auditor appointed to audit the accounts and balance sheet for the preceding year of account is to be re-appointed as auditor for the current year of account unless:

(1)

a resolution has been passed at a general meeting appointing somebody instead of him or providing expressly that he is not to be re-appointed; or

(2)

he has given notice of his unwillingness to be re-appointed; or

(3)

he is ineligible for appointment for the current year of account; or

(4)

he has ceased to act as auditor by reason of incapacity.

Obligation to appoint auditors

6.

Section 4 of the Friendly and Industrial and Provident Societies Act 1968 provides that a credit union is to appoint a qualified auditor or auditors to audit the accounts and balance sheet unless:

(1)

the aggregate of the receipts and payments in respect of the preceding year of account did not exceed £5,000;

(2)

the number of members at the end of the preceding year did not exceed 500; and

(3)

the aggregate value of assets at the end of that year did not exceed £5,000.

7.

If all these conditions apply, the credit union may appoint two or more lay auditors (subject to any direction given by the FSA).

Qualified auditors

8.

Section 7 of the Friendly and Industrial and Provident Societies Act 1968 provides that no person is a qualified auditor unless he is eligible for appointment as a company auditor under section 25 of the Companies Act 1989, that is to say a person who is registered with one of the five supervisory bodies recognised under the Companies Act 1989or the Companies Act 2006, as appropriate:2

(1)

the Institute of Chartered Accountants in England and Wales;

(2)

the Institute of Chartered Accountants in Scotland;

(3)

the Institute of Chartered Accountants in Ireland;

(4)

the Chartered Association of Certified Accountants; and

(5)

the Association of Authorised Public Accountants.

Restrictions on appointment of auditors

9.

Section 8 of the Friendly and Industrial and Provident Societies Act 1968 provides that none of the following persons is to be appointed as auditor of a credit union:

(1)

an officer or servant of the credit union;

(2)

a person who is a partner of, or in the employment of, or who employs an officer or servant of the credit union.

Auditors' report

10.

Section 9(2) of the Friendly and Industrial and Provident Societies Act 1968 provides that the audit report is to state whether the revenue account and the balance sheet comply with the requirements of the Friendly and Industrial and Provident Societies Act 1968 and the Industrial and Provident Societies Act 1965 and whether in the opinion of the auditors:

(1)

the revenue account gives a true and fair view of the income and expenditure of the credit union as a whole for that year of account; and

(2)

the balance sheet gives a true and fair view either of the assets and current liabilities of the credit union and the resulting balances of its funds or of the state of affairs of the credit union (as the case may require) as at the end of that year of account.

11.

Section 9(4) of the Friendly and Industrial and Provident Societies Act 1968 provides that it is the duty of the auditors to make such investigations as will enable them to form an opinion as to:

(1)

whether the credit union has kept proper books of account in accordance with section 1(1)(a) of the Friendly and Industrial and Provident Societies Act 1968;

(2)

whether the credit union has maintained a satisfactory system of control over its transactions in accordance with section 1(1)(b) of the Friendly and Industrial and Provident Societies Act 1968;

(3)

whether the revenue account and other accounts to which the report relates, and the balance sheet are in agreement with the books of account of the credit union.

12.

Section 9(4) of the Friendly and Industrial and Provident Societies Act 1968 also provides that if the auditors are of the opinion that the credit union has failed to comply with section 1(1)(a) or (b) of the Friendly and Industrial and Provident Societies Act 1968, or if the revenue account, the other accounts and the balance sheet are not in agreement with the books of account of the credit union, the auditors are to state that fact in their report.