## Audit of LLP
### Records to be Maintained by an LLP
An LLP must maintain:
- A cash book and ledger
- A record of assets and liabilities
- Statements of costs of goods purchased, inventories, WIP, finished goods, and cost of goods sold
- Any other particulars decided by the partners
### Audit Applicability — Rule 24 of LLP Rules, 2009
Audit is mandatory when:
| Criterion | Threshold |
|---|---|
| Capital Contribution | ≥ ₹25 Lakhs |
| Turnover | ≥ ₹40 Lakhs |
Either condition triggers mandatory audit.
### Advantages / Purpose of Audit
1. Detection of Errors & Frauds — Helps detect errors, frauds, and verifies financial statements.
2. Dispute Resolution — Audited accounts settle disputes between partners on matters of accounts.
3. Reliability — Banks and financial institutions lend only on the basis of audited accounts.
4. Better Compliance and Management — Auditor's periodic visits and suggestions improve LLP management.
5. Reconstitution — Audited accounts are essential for settling accounts at admission, death, retirement, insolvency, or insanity of a partner.
### Returns to be Filed
| Form | Purpose | Due Date |
|---|---|---|
| Form 11 | Annual Return | Within 60 days from end of FY |
| Form 8 | Statement of Accounts & Solvency | Within 30 days from end of 6 months from FY |
### Appointment of Auditor
- First Auditor: Appointed at any time before the end of the first financial year. In case of casual vacancy, filled by the designated partner; if the designated partner fails, by any other partner.
- Subsequent Auditor: Appointed at least 30 days prior to the end of the financial year.
### Auditor's Duties
1. Engagement Letter — Obtain definite written instructions about the scope of work.
2. Minutes Book — Review any resolutions passed regarding accounts.
3. LLP Agreement — Read and note key provisions:
- Nature of business
- Capital contributed by each partner
- Interest on additional capital
- Duration of partnership
- Drawings allowed to partners
- Salaries, commission payable to partners
- Borrowing powers
- Rights and duties of partners
- Method of settlement at reconstitution
- Loans advanced by partners
- Profit-sharing ratio
4. Reporting — The audit report must state:
- Whether records appear correct and reliable
- Whether all information and explanations were obtained
- Whether any restriction was imposed on the auditor