Limited Liability Partnership (LLP) is a popular form of business structure in India, as it combines the benefits of both a partnership firm and a private limited company. Just like any other business structure, LLPs are required to comply with various legal and regulatory requirements. One such requirement is getting the accounts audited. In this blog, we will discuss the LLP audit applicability and who needs to get their accounts audited.
What is an LLP?
Before we delve into the LLP audit applicability, let us first understand what an LLP is. An LLP is a legal entity that has a separate legal existence from its partners. It provides limited liability protection to its partners, which means that the personal assets of the partners are not liable to be used to pay off the debts of the LLP. LLPs are governed by the Limited Liability Partnership Act, 2008.
LLP Audit Applicability
LLPs are required to get their accounts audited in certain cases. Let us understand the LLP audit applicability in detail.
Mandatory Audit
LLPs whose turnover exceeds Rs. 40 lakhs or whose contribution exceeds Rs. 25 lakhs are required to get their accounts audited. The turnover and contribution limits have been increased from Rs. 25 lakhs and Rs. 15 lakhs, respectively, by the Companies (Amendment) Act, 2020.
Voluntary Audit
LLPs whose turnover or contribution does not exceed the limits mentioned above can opt for a voluntary audit. A voluntary audit is done to assure the partners and other stakeholders that the accounts of the LLP are accurate and reliable.
Tax Audit
LLPs whose turnover exceeds Rs. 1 crore in a financial year are also required to get a tax audit done under the Income Tax Act, 1961. The tax audit is done to ensure that the LLP has maintained proper books of accounts and has complied with the tax laws.
Benefits of Getting an LLP Audit
Getting an LLP audit done has various benefits, such as:
- It helps in detecting any errors or irregularities in the accounts of the LLP.
- It assures the partners and other stakeholders that the accounts of the LLP are accurate and reliable.
- It helps in complying with the legal and regulatory requirements.
- It helps in improving the financial management of the LLP.
The audit process involves a thorough examination of the financial statements of the LLP by a qualified auditor. The auditor provides an opinion on the financial statements, which helps the stakeholders to make informed decisions. The audit report also provides information on the financial health and performance of the LLP.
Apart from the mandatory and voluntary audit, LLPs may also need to get a special purpose audit done. For instance, if an LLP receives government grants or subsidies, it may need to get a specific purpose audit done to ensure that the funds have been used for the intended purpose.
In case an LLP does not comply with the audit requirements, it can face legal consequences. The LLP and its partners can be penalized for non-compliance, and their reputation can be adversely affected. Therefore, it is crucial for LLPs to comply with the audit requirements and maintain accurate and reliable financial records.
Conclusion
LLP audit applicability is an essential aspect of compliance for LLPs in India. LLPs need to comply with the mandatory audit requirements if their turnover or contribution exceeds the prescribed limits. LLPs can also opt for a voluntary audit or a special purpose audit, depending on their needs. Complying with the audit requirements can help LLPs maintain accurate and reliable financial records and improve their financial management.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q: What is an LLP audit?
A: An LLP audit is an examination of the financial statements of an LLP by a qualified auditor to provide an opinion on their accuracy and reliability.
Q: Who needs to get their accounts audited?
A: LLPs whose turnover exceeds Rs. 40 lakhs or whose contribution exceeds Rs. 25 lakhs are required to get their accounts audited. LLPs whose turnover or contribution does not exceed the limits mentioned above can opt for a voluntary audit.
Q: What is a tax audit?
A: A tax audit is required for LLPs whose turnover exceeds Rs. 1 crore in a financial year. The audit is done to ensure that the LLP has maintained proper books of accounts and has complied with the tax laws.
Q: What are the benefits of getting an LLP audit done?
A: Getting an LLP audit done helps in detecting any errors or irregularities in the accounts of the LLP. It also assures the partners and other stakeholders that the accounts of the LLP are accurate and reliable. Additionally, it helps in complying with the legal and regulatory requirements and improving the financial management of the LLP.
Q: What happens if an LLP does not comply with the audit requirements?
A: Non-compliance with the audit requirements can lead to penalties and fines imposed by the government. The LLP and its partners can face legal consequences, and their reputation can be adversely affected.
Q: How often does an LLP need to get its accounts audited?
A: An LLP needs to get its accounts audited every financial year. The audit report needs to be filed with the Registrar of Companies within 30 days from the date of completion of the audit.
Q: Can an LLP change its auditors?
A: Yes, an LLP can change its auditors. However, the new auditor needs to be appointed before the end of the financial year for which the audit is being conducted.
Q: Is it mandatory for LLPs to appoint a Chartered Accountant as an auditor?
A: Yes, LLPs need to appoint a Chartered Accountant as an auditor for their accounts. The auditor needs to be a practicing Chartered Accountant registered with the Institute of Chartered Accountants of India.
