New Delhi, Oct 14: The Centre has introduced a standardised audit reporting framework for multi-state cooperative societies, aimed at identifying financial stress early, detecting irregularities and strengthening governance and regulatory oversight.

The Ministry of Cooperation announced the Multi-State Co-operative Societies (Auditor's Report) Order, 2026 (MSCARO, 2026), which requires auditors to examine and report on key financial, administrative and statutory compliance parameters.

Under the new framework, auditors will assess non-performing assets (NPAs), overdue loans, liquidity positions, deposits, advances, repayment defaults and borrowings. The standardised reporting system is intended to help regulators identify financial weaknesses and initiate corrective action before problems escalate.

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The ministry said the framework would facilitate the early detection of financial stress, safeguard members' funds and strengthen compliance with statutory and governance requirements.

The order also introduces risk-based supervision, enabling the Central Registrar of Cooperative Societies (CRCS) to identify societies facing higher financial or governance risks based on audit findings. This would allow regulators to focus inspections, inquiries and other interventions on institutions requiring closer scrutiny.

The ministry plans to integrate standardised audit information with the CRCS Portal to enable technology-driven monitoring. The proposed system could support automated scrutiny, regulatory dashboards, risk scoring and artificial intelligence-based analytics to identify compliance gaps.

The audit requirements extend beyond financial statements. Auditors will verify investments, the utilisation of funds, share capital, membership records and relevant statutory approvals. They will also examine the composition of boards, directors' eligibility and disqualification, annual general meetings, board meetings, statutory committees and related-party transactions.

The framework further provides for audit-level verification of cybersecurity safeguards and anti-money laundering compliance, wherever applicable. This includes checks on suspicious transactions, customer identification and compliance with requirements under the Prevention of Money Laundering Act (PMLA).

The ministry said the order was framed under Section 73(6) of the Multi-State Co-operative Societies Act, following the 2023 amendment that empowered the Central Government to prescribe auditing and accounting standards for multi-state cooperative societies.

The framework was developed based on inputs from the Reserve Bank of India (RBI), the Institute of Chartered Accountants of India (ICAI), the Comptroller and Auditor General of India (CAG) and multi-state cooperative societies. It draws on the Companies (Auditor's Report) Order applicable to the corporate sector.

Implementation will be phased to give societies time to strengthen their internal systems and processes. The initial phase will cover larger societies crossing the prescribed Rs 1,000 crore thresholds, with the long-term objective of extending the framework to societies crossing the relevant Rs 50 crore thresholds.

The ministry said the combination of standardised audit reporting, risk-based supervision and technology-driven monitoring would strengthen institutional credibility and protect the financial interests of cooperative members. (With ANI inputs)