## LLP Audit — Reviewing the LLP Agreement and Reporting Responsibilities

### Why the LLP Agreement Matters

The LLP agreement is the constitutional document governing the LLP. It defines financial rights, obligations, and profit-sharing of partners. The auditor must read it before auditing partner-related transactions.

### 11 Key Provisions to Note from the LLP Agreement

#	Provision
1	Nature of business of the LLP
2	Capital contributed by each partner
3	Interest payable on additional capital contributed
4	Duration of the partnership
5	Drawings allowed to the partners
6	Salaries, commission, etc. payable to partners
7	Borrowing powers of the LLP
8	Rights and duties of partners
9	Settlement of accounts at admission, retirement, or dissolution
10	Any loans advanced by partners to the LLP
11	Profit-sharing ratio

### Reporting Responsibilities of the LLP Auditor

The auditor's report on an LLP's financial statements should state:

1. Whether the records of the firm appear correct and reliable

2. Whether the auditor was able to obtain all information and explanations necessary for the audit

3. Whether any restriction was imposed on the auditor in carrying out the audit

### Memory Aid for Reporting — CIR

Correct and reliable records
Information and explanations obtained
Restrictions imposed (if any)

Worked example

### Example 1

MTP 5 Scenario: While auditing Bro Traders LLP, CA L is reviewing the LLP agreement. What key points should CA L note, and what are CA L's reporting responsibilities?

Answer: From LLP agreement, CA L should note: (a) nature of business; (b) capital per partner; (c) interest on additional capital; (d) duration; (e) drawings allowed; (f) salaries/commission to partners; (g) borrowing powers; (h) rights/duties of partners; (i) settlement of accounts on admission/retirement/dissolution; (j) partner loans to LLP; (k) profit-sharing ratio.

Reporting: CA L should state in the audit report — (a) whether records appear correct and reliable; (b) whether all information and explanations necessary were obtained; (c) whether any restriction was imposed on the auditor.

⚠️ Common exam mistakes

Listing only 5-6 items from the LLP agreement and missing the rest — the full 11 points are expected for complete marks
Confusing LLP reporting requirements with company audit reporting — LLP reports have three specific items that differ from CARO requirements
Forgetting 'restrictions imposed on the auditor' as a specific reporting responsibility
Not distinguishing between partner drawings (routine) and partner loans (financing arrangements requiring separate disclosure)

Reference:

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LLP Audit – Review of LLP Agreement and Reporting Responsibilities

Worked example

⚠️ Common exam mistakes