Auditor is a person appointed for the purpose of checking the financial accounts of company and ensuring that they comply with the applicable rules and regulations. It is mandatory for every company to undergo a audit registered under the companies act 2013. However, the Limited Liability Partnership registered under the LLP act 2008 does not mandatorily require to undergo an audit. There is turnover limit for LLP for which the audit must be conducted. Through this article we will take a look at the role of auditors in Limited Liability Partnership.
The turnover limit for the audit of the Limited Liability Partnership under the LLP act is 40 Lakhs which an LLP is required to undergo an audit if its annual turnover exceeds 40 lakhs in a financial year or the contribution exceeds 5 lakhs in a financial year. Whereas, according to the income tax act if the turnover of LLP exceeds 1 crores in case of a business while the same is 50 lakhs for profession. Only the LLP coming under these categories are required to appoint an auditor and conduct the audit.
Role of Auditor in LLP
The main role of auditor in any kind of business structure is to ensure that business financial statements are maintained in the correct form and they provide the true and fair view of the affairs of the company. Apart from this there are certain other roles of the auditor that needs to be performed as mentioned below –
- To perform the activity of audit first of all the auditor is required to take an understanding of the working of LLP environment and the internal procedures applied to it.
- Placing the adequate risk measures on the internal control system of the LLP.
- Discuss with the management the audit procedures that he will be following while conducting the audit of the firm and documents he will be requiring.
- While, conducting the audit the vouching of the business , verification of all the assets physically, tax compliances etc shall be done to ensure the compliance of rules and regulations.
- Conducting the analysis through sampling and ratio analysis.
- Also, the internal audit report issued with respect to LLP issued by the internal auditor shall be checked by the statuary auditor.
- Also, for the reference purposes the previous year audit report can be consulted but the internal auditor.
- Finally after conducting the comprehensive audit the auditor shall state whether the financial report of the Limited Liability Partnership give the true and fair view or not.
- Also, the auditor of the Limited Liability Partnership shall ensure and report that all the necessary disclosures are made in the audit report.
All of these activities are performed by the auditor in the Limited Liability Partnership in order to ensure that financial accounts of the LLP are in conformity with the applicable rules and regulations and they present the true and fair value of its state of affairs. Also, the audit conducted by the auditor should reflect that the financial records of the company are free from any errors or defects.