# Audit of LLP (Limited Liability Partnership)

## Key Structural Facts [High MCQ Frequency]

Parameter	Requirement
Minimum Partners	2
Minimum Designated Partners	2
Designated Partners must obtain	DPIN (Designated Partner Identification Number)

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## Small LLP

An LLP qualifies as a Small LLP if it meets BOTH of the following conditions simultaneously:

Condition	Threshold
Contribution	≤ ₹25 lakh
Turnover (previous FY)	≤ ₹40 lakh

> Do not confuse with ICAI's small entity concept — these are LLP-specific thresholds.

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## Audit Requirements

### General Rule

Every LLP is required to get its accounts audited.

### Exemption — Rule 24 of LLP Rules, 2009

No audit required only if BOTH conditions are satisfied:

Condition 1: Contribution ≤ ₹25 lakh
Condition 2: Turnover ≤ ₹40 lakh

Crossing EITHER threshold triggers the audit requirement.

Contribution	Turnover	Audit Required?	Reason
₹20 lakh	₹30 lakh	No	Both within limits
₹26 lakh	₹30 lakh	Yes	Contribution exceeds ₹25 lakh
₹20 lakh	₹42 lakh	Yes	Turnover exceeds ₹40 lakh
₹26 lakh	₹45 lakh	Yes	Both limits breached

> Key rule: exemption requires AND (both conditions) — audit kicks in on OR (either breach).

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## Appointment of Auditor

Audit is conducted by Designated Partners.

	First Auditor	Subsequent Auditor
When appointed	Any time before end of first FY	At least 30 days prior to end of each FY

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## Returns to be Filed [MCQ — Focus on Form Numbers & Timelines]

Form	Content	Due Date
Form 11	Annual Return	Within 60 days from close of FY
Form 8	Statement of Accounts & Solvency	Within 30 days from end of first 6 months of FY

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## Books of Accounts Required

1. Particulars of all sums received and expended by the LLP (Receipt & Expenditure)

2. Statement of:

Cost of goods purchased
Inventories
Work-in-Progress (WIP)
Finished Goods
Cost of Goods Sold

3. Record of Assets and Liabilities (Balance Sheet equivalent)

4. Any other particulars as the partners decide

Worked example

### Example 1

Scenario: An LLP has contribution of ₹20 lakh and turnover of ₹42 lakh for the previous FY. Is audit mandatory?

Answer: Yes, audit is mandatory. Although the contribution (₹20 lakh) is within the ₹25 lakh threshold, the turnover of ₹42 lakh exceeds the ₹40 lakh limit. Both conditions must be satisfied simultaneously for exemption under Rule 24. Since one condition is breached, the exemption is lost and audit is required.

### Example 2

Scenario: An LLP has contribution of ₹24 lakh and turnover of ₹38 lakh. Is audit mandatory?

Answer: No, audit is not mandatory. Both conditions are satisfied — contribution ≤ ₹25 lakh AND turnover ≤ ₹40 lakh. The LLP qualifies for the exemption under Rule 24 of the LLP Rules, 2009.

### Example 3

Scenario: XYZ LLP was incorporated on 1 April 2024. Its first financial year ends on 31 March 2025. When must the first auditor be appointed?

Answer: The first auditor must be appointed at any time before 31 March 2025 (before the end of the first FY). For subsequent years, appointment must happen at least 30 days before the end of each financial year.

⚠️ Common exam mistakes

Thinking exemption from audit applies if EITHER condition is met — BOTH contribution ≤ ₹25 lakh AND turnover ≤ ₹40 lakh must be satisfied; crossing either one triggers audit
Confusing the Small LLP definition (contribution ≤ ₹25 lakh AND turnover ≤ ₹40 lakh) with the audit exemption thresholds — they use the same numbers but serve different purposes
Forgetting that the first auditor can be appointed at any time before the end of the FIRST FY, while subsequent auditors need appointment 30 days before end of EACH FY
Mixing up Form 8 (Statement of Accounts & Solvency) with Form 11 (Annual Return) in MCQs
Assuming minimum designated partners is different from minimum total partners — both happen to be 2, but DPIN is required only for designated partners

Bare-Act text Rule 24 · LLP Rules, 2009 · click to expand

A limited liability partnership shall be exempted from the requirement of audit of its accounts if the contribution of the LLP does not exceed twenty-five lakh rupees or the annual turnover does not exceed forty lakh rupees in a financial year.

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