What is an LLP Audit?
A Limited Liability Partnership is a hybrid of a company and a partnership. A limited liability partnership is required to maintain annual books of accounts under the Limited liability partnership (LLP) act. The LLP's books of account shall be kept at its registered office or a location mutually agreed upon by the partners. LLPs might choose to keep their records on a cash or accrual basis. Financial statements include the LLP balance sheet, income statement, and expenditure statement. Every LLP whose turnover is more than Rs.40 lakhs or whose contribution is more than Rs.25 lakhs in any financial year is subject to statutory audit.
LLP audit requirement
As previously discussed, Limited Liability Partnerships with a turnover of more than Rs.40 lakh or a donation of more than Rs.25 lakh are required by the Limited Liability Partnership Act, 2008 to have their books of accounts audited by practicing Chartered Accountant. September 30 is the deadline for filing a tax return for an LLP that is required to have its books audited.
Note - The Rs.1 crore threshold for a tax audit is enhanced to Rs.5 crore with effect from AY 2021-22 (FY 2020-21) if the taxpayer's cash receipts are limited to 5% of gross receipts or turnover, and cash payments are limited to 5% of aggregate payments under the Income Tax Act, 1961.
For LLPs that do not require a tax audit, the tax filing deadline is July 31st. Form 3CEB is required for LLPs who have entered into foreign transactions with related firms or have engaged in certain domestic activities. This form should be certified by a chartered accountant in practice. Limited Liability Partnerships that are required to file this form must do so by November 30th.
LLPs should use Form ITR 5 to file their income tax returns. This form may be filed electronically through the income tax website using the designated partner's digital signature.
Statements of Accounts and Solvency
All enrolled LLP's are obliged to maintain books of accounts and to input data regarding profits gained and other financial data pertaining to the firm on Form 8, which must be submitted every year. Form 8 must be attested by the signatures of the authorised partners and certified by a practicing chartered accountant, a company secretary, or a cost accountant in practise. Failure to file the statement of account and solvency report on time may result in a fine of Rs.100 per day. Form 8 must be filed by October 30 of each financial year.
Account maintenance of LLP
Since registration, all LLP's are expected to maintain proper books of accounts on a cash or accrual basis. Private Limited Companies are required to maintain their books of accounts on an accrual basis; however, LLP's may do so as well. The book of accounts must be kept at the LLP's Registered Office and must include information on all funds received and expenditure, assets and liabilities, cost of goods sold, inventories, and finished goods. All LLP's are required to prepare the statement of accounts and solvency within six months of the end of each financial year for filing with the ROC.
Exemption from LLP audit
Among other things, these rules provide that any Limited Liability Partnership whose annual revenue does not exceed Rs.40,00,000/- or whose annual revenue does not exceed Rs.25,00,000/- is not required to have its books audited. Nonetheless, if the partners of such LLP (limited liability partnership) prefer to have the LLP's accounts audited, the accounts must be audited strictly in accordance with the standards. LLPs are required to appoint an LLP auditor within one month of the financial year's end. In other words, an auditor should be selected once a year prior to the primary of march.
Auditor
A firm may appoint an auditor to conduct an audit. LLPs are required to have their books of accounts audited if their annual revenue exceeds a specified threshold or if the total capital contribution of partners exceeds a specified threshold. Each LLP's accounts are audited in accordance with Rule 24 of the LLP, Rules 2009. Such laws specify that any Limited Liability Partnership with a turnover of less than 40,00,000 rupees or a contribution of less than twenty-five lakh rupees in any financial year is not required to get its accounts audited.
Appointing by designated partners
The auditor may be appointed by the designated partners;
– At any time throughout the first financial year but prior to the financial year's end.
– Within one month before the financial year's end.
It can be done to-
– To fill a general vacancy in the auditor's office.
– To fill a vacancy created by the departure of the auditor.
Appointing by partners
If the designated partners are not appointed, the partners may take on their responsibilities.
LLP Annual filing of Returns
The annual return must be filed with the Ministry of Corporate Affairs in the prescribed format. Annual returns filed with the MCA are different from annual returns filed with the tax department. An LLP is required to file the annual return with ROC within 2 months of the end of the financial year in form 11.
Holding office
An auditor must occupy office from the day the preceding auditor quits and until the conclusion of the next period for selecting a new auditor until re-appointed.
Penalty
Any LLP that does not meet the requirements shall be subject to a fine of not less than Rs.25,000 but not more than Rs.5,00,000. Each designated partner shall be subject to a fine of at least Rs.10,000 but not more than Rs.5,00,000/-.
