Appointment of Auditor in LLP

Like every other company registered in India, an LLP also has to undergo an audit of its books of account. LLP Act, 2008 governs the compliances of an LLP. Provisions of the Companies Act, 2013 of the audit do not apply to the LLP. Under the LLP act appointment of  auditor in LLP has a certain threshold limit. Only above that threshold limit an LLP has to audit its books of accounts. This relaxation under the Act has encouraged entrepreneurs in India to LLP registration. It saves LLP from various hardships in complying with government rules. It also saves audit costs and promotes saving, funds, and time.

One of the advantages of LLP is that the audit rule applies only above the threshold limit. Following is the threshold provided under the rules for the audit of the accounts of an LLP:
If turnover > Rs 40 lacs in a financial year
or/and Contributions> Rs 25 lacs in a financial year

LLP which does not exceed the above-mentioned threshold need not have an audit. Although partners can suo-moto decide to go for the LLP audit. If the above exemption applies to any LLP, then you have to file a declaration. The declaration will state the position of turnover not exceeding the above threshold. In e-form 8, the declaration is filed every year with ROC as LLP compliance.

The responsibility to appoint an auditor in an LLP is of designated partners. At any time for the first financial year but within 30 days before the end of the Financial Year. If designated partners fail to appoint an auditor in an LLP within a prescribed period. Then partners will have the right to get the appointment done.

Appointment of auditor in LLP procedure

In absence of any specific auditor appointment procedure given under LLP Act 2008. An LLP can appoint an auditor by passing a resolution signed by the designated partners. Such appointments do not need any e-form. Prior consent of the auditor is a must for his appointment in an LLP. The designated partners have powers for such appointments. Otherwise, the partners have the right to appointment of auditor in LLP. An auditor appointment can be at any time in the financial year. But it should be 30 days before the end of the financial year. There is no procedure prescribed for the reappointment of the auditor. The old auditor will continue if no resolution for the new auditor is there in the partner’s meeting.

Unlike under the Companies Act, 2013 there is no provision under the LLP Act, 2008 for auditors’ fees. LLP agreement and/or the mutual understanding between partners and auditor will prevail.

Documents for appointment of auditor in LLP

1. Consent letter

2. A valid certificate from an auditor stating their eligibility to get appointed.

3. A resolution from an LLP

4. No form is there to intimate the ROC for an auditor appointment in an LLP.

Removal of auditor from the LLP

There is no particular period of auditor appointment in an LLP. Like in the case of a private company which has the criteria for 5 years auditor appointment. An LLP auditor holds the office until a new auditor is appointed by the designated partners.
For removing the auditor from his position, an LLP requires the consent of all the partners. LLP can remove an auditor by passing a resolution only. The auditor can resign from office by submitting a resignation letter. The term of the auditor comes to an end as of the date of the resignation. or any further date specified on the resignation letter.

Penalty if appointment of auditor in LLP is not made

LLP fails appointment of auditor in LLP before the prescribed period. The LLP will be punishable with a fine which will not be less than Rs. 25,000 not exceeding Rs. 5,00,000. Every designated partner will be punished with a fine that will not be less than Rs. 10,000 and not exceed Rs. 5,00,000.