What is a statutory audit for an LLP?
A statutory audit is a mandatory examination of an LLP’s financial records and statements to ensure they comply with legal requirements and Indian accounting standards.
Is a statutory audit mandatory for all LLPs in India?
No, a statutory audit is not mandatory for all LLPs. Only those LLPs whose turnover is over Rs. 40 laths or whose partner contribution exceeds Rs 25 lakhs in a given financial year must undergo a statutory audit.
What is the limit for statutory audit of LLP?
The Limited Liability Partnership Act, 2008, requires every LLP to get its accounts audited annually by a qualified Chartered Accountant (CA) if it meets either of the following criteria:
· The annual turnover of the LLP exceeds Rs 40 laths in the previous financial year.
· The total contribution from partners exceeds Rs 25 laths (even if the turnover is below Rs 40 laths)
A statutory audit for LLP is conducted by independent auditors. The main aim is to make sure that its financial statements are prepared in accordance with Indian Accounting Standards or In AS and provide an accurate and fair view of its financial position.
When should an LLP appoint an auditor?
An LLP should appoint an auditor within 30 days of its registration or within 30 days of the financial year in which a statutory audit becomes applicable.
How long does a statutory audit for LLP take?
The duration of a statutory audit of an LLP varies depending on the size and complexity of the business. Usually it takes a few weeks to a month or two.
What are the benefits of statutory audit of LLP?
Benefits of Statutory Audit of LLP are as follows:
a) Ensured Legal Compliances
b) Enhanced Credibility and Transparency
c) Improved Financial Management
d) Attracting Investments and Funding
e) It helps in detecting any errors or irregularities in the accounts of the LLP.
f) It assures the partners and other stakeholders that the accounts of the LLP are accurate and reliable.
g) It helps in complying with the legal and regulatory requirements.
h) It helps in improving the financial management of the LLP.
Does LLP is subjected to Tax audit also?
Apart from the statutory audit, an LLP with a turnover exceeding Rs 1 core also needs to undergo a tax audit under the Income Tax Act. This is separate from the statutory audit and is conducted by qualified CAs. It seeks to ensure that an LLP’s books of accounts are maintained correctly and its income is calculated as per tax laws.
How Can You Stay Compliant with LLP Audit Requirements?
To stay compliant, LLPs need to maintain proper financial records and be aware of their filing deadlines. Appointing an auditor in advance, if necessary, will help streamline the process.
What are the checklists to ensure audit compliance in case of LLP?
Here's a checklist to help you stay on top of your compliance
· Maintain detailed financial records.
· Check your turnover and contribution to determine if an audit is necessary.
· Ensure timely filing of the Statement of Accounts & Solvency and Annual Return.
· Engage with a professional auditor if your LLP crosses the audit threshold.
Can LLP opt for voluntary audit?
Yes. 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.
What happens if an LLP does not comply with the audit requirements?
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.
How often does an LLP need to get its accounts audited?
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.
Can an LLP change its auditors?
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.
Is it mandatory for LLPs to appoint a Chartered Accountant as an auditor?
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.