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Audit of Charitable Societies

Let's learn about charitable societies in detail. Understand the procedure of the audit of charitable societies, the responsibilities of the Auditor and the rules that are followed.

Charitable societies are organisations whose purpose is freedom and society’s well-being. They help the interests of the common good in fields of education, religion, etc. The way laws and taxes such as audits affect charitable societies differs from country to country. Charitable organisations mainly depend on donations from others for business. The audit of charitable societies comes under forms 10B and 10BB. Various verifications are conducted during the audit of charitable societies. A specific procedure needs to be followed by charitable societies if the income accumulated is more than the limit.

Charitable Societies

Charitable societies were created for philanthropic purposes. They work for the betterment of humanity, help the needy, provide basic amenities and education to the needy, and for some religious purposes. Charitable societies are funded through the donations that they receive. These donations usually come from people in business looking to do some good.

Requirement for Audit of Charitable Societies

For a charitable society to audit, the following requirements need to be fulfilled.

  • If society’s total income is not more than the said maximum amount in the prior year, then no audit is needed
  • If it is found that total income does not pass the limit of maximum expense, then no income tax needs to be paid
  • If the income of a charitable society comes under section 11 or 12, or Clauses 23, 23AA or 23C, then their donations qualify for the deduction

Duty of the Auditor for Charitable Societies

When an auditor is conducting an audit of charitable societies, he should consider the following points. He should have sound knowledge of charitable societies’ constitutions and legal status. The Auditor should also be aware of the rules and laws of the state government, the central government and any other regulations that apply to charitable societies. To conduct an audit of the charitable societies, he should collect a list of correspondence, accounts, and other required documents. The Auditor should be familiar with all the details which may affect his decisions about the charitable society.

The following are the Auditor’s duties, which are to be conducted by an audit of charitable societies.

  • To obtain the list of regular donors and keep track of the nature and purpose of the donations that they made
  • To obtain verification of the amounts of subscriptions
  • The Auditor should account for the subscriptions and donations in receipts, donor registers, cash books and members lists
  • The Auditor must make sure whether the funds received for a specific purpose are used for the same purpose
  • The Auditor should verify the nature of the donations made and how the accounting treatment of such contributions should be conducted
  • During an audit of charitable societies, he should treat the capital and revenue donation separately
  • The Auditor should study the state code to verify if any grant applies to the charitable society
  • He should verify the subscriptions that have been made but not received yet
  • He should also verify the unreceived subscriptions from last year
  • The investments of charitable societies should be verified following the rules of charitable societies
  • The investments must be checked in the physical registers during an audit of charitable societies
  • The legacies should be verified with the help of the legacies register and receipt books

Along with all these duties, the Auditor keeps a few more things in his mind while conducting the audit of charitable societies. The Auditor should verify the liabilities and assets of the charitable society on the balance sheet date. The Auditor should also look at the cash in hand, the money at the bank and the expenses should be carefully looked into according to the general rules of auditing.

Documents Requirement

The following documents should be checked thoroughly by the Auditor during the audit of charitable societies.

  • All reports from the payments and receipts
  • All balance sheets in the charitable societies
  • A report of profit and loss along with proof and business reports
  • All the details of the meetings with the trust and governing committee
  • All accounts of expenditure and statements of income
  • Proof of paid Income Tax documents if income tax is applicable on the audit of charitable societies

Possible Expenses of Charitable Societies

The expenses of Charitable societies can be distributed among the following fields. All of this needs to be checked during the audit of charitable societies.

  • Medical or educational services that the charitable society offers
  • Purchase of shares, securities or any other investments made by the charitable society
  • Payments of the salaries of employees working for the charitable society
  • Application of income


Charitable societies are organisations that aim to do philanthropy. The most significant source of their budget is primarily donations made. They need to maintain a thorough record of where a particular offering came from and what purpose it was used for. When their income goes over the maximum amount, they have to pay taxes, and there is an audit of charitable societies. 


Frequently asked questions

Get answers to the most common queries related to the UPSC Examination Preparation.

What is verification during the audit of charitable societies?

Answer: The verification during the audit of charitable societies is wh...Read full

State the Auditor's credentials should be considered while computing income.

Answer: The following things should be considered. ...Read full

Are there any changes in the way audits of Charitable societies should be conducted recently?

Answer: The following amendments have been made in how the audit of charitable societies...Read full

When should the tax audit report be filed?

Answer: The tax audit report must be filed about a month before the due date under section 139 (4A) with section 139...Read full