Like every other companies such as private company, public limited company, nidhi company, a limited liability partnership (LLP) has also to undergo audit of its books of accounts, as a limited liability partnership registration is governed by limited liability partnership act, 2008 (LLP act, 2008), the rules framed under companies act, 2013 regarding the audit of companies does not apply to the LLP, under LLP act auditor and audit requirements in a LLP has a certain threshold limit, only above which a LLP has to audit its books of accounts. This relaxation from the government has encouraged various entrepreneurs in India to go for the LLP registration online instead of private company registration as it not only saves the Designated partner and partners of LLP from tremendous amount of hardships in complying with government rules regulations and other monthly/half yearly and yearly compliances but also saves audit cost and promote saving, the fund and the time can be utilized in the business. ‘
Audit and audit requirements in Limited Liability Partnership LLP
One of the advantages of LLP registration is that only those LLP, whose turnover or/and contribution exceeds the prescribed limit under the LLP rules are required to get its account audit by the practicing chartered accountant. Auditor of a LLP has to be appointed within 30 days before the end of the financial year i.e. before 1st, march every year.
Following is the threshold provided under the rules for audit of the accounts of a LLP:
If turnover > Rs 40 lacs in a financial year
Contribution > Rs 25 lacs in a financial year
LLP which does not exceed the above mentioned threshold are exempted from audit requirements, although partners can suo moto decide to go for the LLP audit. If the partners decide not to go for audit of the exempted LLP then a necessary declaration and solvency stating explicitly that “neither the turnover and not the contribution exceeds the threshold limit prescribed under the LLP act, 2008 and the auditors have taken proper care for maintaining proper records as per the LLP act, 2008 has to provided by them in form 8 which need to filed every year.
Who can appoint auditor in a LLP
It is the first responsibility of the designated partners to appoint an auditor, and they can appoint:
At any time for the first financial year but within 30 days before the end of the Financial Year.
Auditor to fill up the casual vacancy cause by the resignation of previous auditor.
Auditor in place of a auditor removed.
If designated partners fails to appoint a auditor in a LLP within a prescribed time period than partners shall have the right to get the appointment done.
Procedure for appointment of auditor in a LLP
Every LLP has to appoint a auditor who shall audit their accounts if it exceeds the turnover/contribution limit. Every Auditor has to be appointed at the beginning of each financial year and shall hold the office until new auditors are appointed or they are re-appointed. As there is no procedure for appointment of the auditor is prescribed, it can be interpreted that LLP can appoint a auditor by simply passing a resolution signed by the authorized designated partner. The designated partner can appoint a auditor at any time during a financial year but it should be atleast before 30 days before the end of the financial year for any of the below mentioned situations: If the turnover/contribution exceeded the prescribed threshold limit To fill up the casual vacancy caused by the removal of the auditor Even the partners have the power to appoint the auditor for an LLP, if the designated partners failed to do so. If no auditor is appointed at the end of the next financial year then the auditor shall be deemed to be reappointed, unless any specific clause related to appointment is mentioned in the LLP agreement or majority of the partners have determined that the continuing auditor should not be reappointed.
Remuneration of a auditor in LLP
Unlike under companies act, 2013, there is no provision under the limited liability partnership act, 2008 is prescribed for the remuneration, therefore it is the LLP agreement and the mutual understanding between the partners and auditor shall prevail.
Documents required for appointing a auditor in a LLP
As no form yet prescribed the ministry, thus there is no need to intimate the ROC for a auditor appointment in a LLP.
Removal of the auditor of a LLP
Auditor are appointed in a LLP not for a particular period as in a case of private company which has the criteria for 5 years auditor appointment, in a LLP auditor hold the office until a new auditor gets appointed by the designated partners. For removing the auditor from his position, a LLP requires consent of all the partners and by passing simply a resolution a auditor can be removed. The auditor can himself cease the office by simply submitting a resignation letter along with the reasons at the registered office of the LLP. The term of the auditor comes to an end as on the date the resignation is submitted or any further date is mentioned on the resignation letter.
Penalty for not appointing the auditor of a LLP
If any LLP fails to appoint its auditor before the prescribed period than it shall be punishable with fine which shall not be less than Rs. 25,000 not exceeding Rs. 5,00,000. Every designated partner shall be punishable with fine which shall not be less than Rs. 10,000 not exceeding Rs. 5,00,000.
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