Authors: Phil Kenkel, Oklahoma State University, email@example.com, and Bill Fitzwater,
Oklahoma State University
Securing an annual audit of the cooperative’s financial records is the responsibility of the board of directors. Because the board acts as the trustee of the cooperative’s assets, it is responsible for safeguarding, auditing, and appraising the cooperative’s financial resources. The audit is a fundamental part of this trustee responsibility, and the cost of the audit should be considered a normal business expense.
The fiduciary responsibilities of the board should not be taken lightly. If a board of directors is negligent in establishing and monitoring the operations of their cooperative, directors could be held liable. The first step in fulfilling this obligation is a complete, double-entry bookkeeping system; second is monthly financial statements; and the third is an annual audit of the accounting records and supporting document.
The fiduciary/trustee responsibility of the board of directors translates into five specific reasons why the board must provide for an annual audit of the cooperative’s accounting records:
There are other reasons why an audit may be required. Creditors and suppliers may require an audit before credit is granted and have an ongoing audit requirement as part of the loan agreements.