LLP (Limited Liability Partnership) Audit

• Auditing and Assurance
• ||
• February 21, 2023

Introduction
As an LLP is a separate legal entity therefore it shall be under obligation to maintain annual accounts presenting true and fair view of state of affairs. Every LLP is required to file “Statement of Accounts and Solvency” in prescribed form with the Registrar every year. 

Applicability

• Every LLP is required to get its accounts audited in accordance with Rule 24 of LLP Rules,x 2009.
• LLP is not required to get its accounts audited if
• 1. Turnover does not exceeds 40 Lakh rupees (in any financial year) and
  2. Contribution does not exceed 25 Lakh rupees (in any financial year).
• However, accounts of LLP can be audited voluntarily with the consent of partners of LLP and the accounts shall be audited only in accordance with such rule.

Filing Forms with ROC

• Annual Return: – Every LLP is required to file annual return in Form 11 with ROC within 60 days from the closure of Financial Year.
• Statement of Accounts and Solvency: – Every LLP is required to submit the “Statement of Accounts and Solvency” in Form 8 within a period of 30 days from the end of Six months of the Financial Year to which it relates.
  

Advantages of LLP Audit

• Detection of Fraud and Errors: Auditing the accounts of a LLP helps in detecting fraud & errors & verification of financial statements
• Settlement of Disputes: Disputes, if any between any partners in the matter of accounts or profits can be settled with the help of audited accounts. Also it helps in settling the accounts at the time of admission, death, retirement, insolvency, insanity, etc. among the partners.
• Borrowing Funds: Banks and financial institutions lend money to the firms only on the basis of audited accounts.

Appointment of LLP Auditor:
The auditor is appointed by the designated partners in case of LLP-

• For First FY: At any time for the first financial year but before the end of first financial year.
• For Subsequent FY: At least 30 days prior to the end of financial year.
• For Casual vacancy: Designated partners to fill the casual vacancy in the office of the LLP or caused by removal of the auditor.

The partners may appoint the auditors if the designated partners have failed to appoint the auditors. 

Auditor’s Duty Regarding Audit of LLP

• It is the auditor’s duty to get definite instructions in writing as to the work to be performed by him
• The auditor should mention:
• 1. Whether the records of the firm appear to be correct & reliable
  2. Whether he was able to obtain all information & explanation which is necessary for the audit
  3. Whether any restriction imposed by the management of the firm.
• The auditor should review the LLP Agreement and note the following points
  1. Nature of the business of LLP
  2. Capital contributed by each partner
  3. Duration of partnership
  4. Drawing allowed to the partners
  5. Borrowing powers of the LLP
  6. Right & duties of partners
  7. Any loans and advance given by the partners
  8. Profit sharing ratio
     

Written by –  Prince Kumar

At MAS, we assist our clients in dealing with internal audits; government audits of various corporate matters (company incorporation), statutory audits, ROC compliance, and company winding-up) in India by providing them adequate support and guidance from our end. If you have any questions or wish to know more about LLP (Limited Liability Partnership) Audit, kindly contact us.