Appointment of Auditor under LLP Act, 2008
As it is mandatory under Companies Act, 2013 to appoint an auditor to verify the books of accounts, a Limited Liability Partnership registered under LLP Act, 2008 shall also appoint an Auditor. When the turnover of a LLP exceeds the threshold limit, auditor shall be appointed
Points covered in this article are
Who is an Auditor?
When and how to appoint an Auditor under LLP Act, 2008?
Documents required for appointing an Auditor
Removal of an Auditor
Remuneration of an Auditor
Penalty for not appointing an Auditor
1. Who is an Auditor?
To review the accounting data and draft a fair and true value of the firm, an auditor is appointed. Appointment of such person has to be made as per the rules stated under Limited Liability Partnership Act, 2008
2. When and How to appoint an Auditor?
Unlike Companies Act, 2013 an Auditor is appointed by the firm if the turnover of the LLP exceeds certain threshold limit
● A limited liability partnership whose turnover does not exceed, forty lakh rupees, or whose contribution does not exceed twenty-five lakh rupees shall not be required to get its accounts audited as per LLP Act, 2008
● When a firm exceeds the threshold limit, appointment shall be done within 30 days of end the financial year
● The auditor must be appointed by approval of all the partners of the firm
● The Auditor appointed must be a member of Institute of Chartered Accountants of India and shall hold the office until new Auditor is appointed
3. Documents required for appointing an Auditor
As there is no requirement to get an approval by the Registrar of Companies, the documents are limited
● Consent of Auditor in writing
● Proof of Qualification to be an Auditor
● Resolution passed by the partners for appointing an Auditor
4. Removal of an Auditor
Under LLP Act, 2008 there is no specific term of office specified by the law as it is under Companies Act, 2013. The auditor shall hold the office until a new Auditor is appointed.
● An Auditor can be removed by passing a simple resolution with approval of all the partners
● If the Auditor is resigning himself, a resignation letter should be submitted in written format. On the date specified in the resignation letter, term of office shall come to an end
5. Remuneration of an Auditor
There are no provisions specified regarding remuneration fees of an Auditor under LLP Act, 2008. So it is upto the agreement between partners and the auditor to decide the fees. Partners and the Auditor must make an mutual agreement
6. Penalty for not appointing an Auditor
A designated partner is liable for appointing an auditor but if the firm fails to appoint an auditor within the specified period, the firm as a whole shall be penalized.
● The penalty shall be a minimum amount of Rs. 25000 not exceeding Rs. 500000 on the LLP
● Every partner shall be charged with fine not less than Rs.10,000 not exceeding Rs. 500000
Compared to the provisions for appointing auditors under Companies Act, 2013 appointment of auditor under LLP Act, 2008 is simpler with more flexibility. Only the LLP with turnover exceeding the turnover limit should mandatorily appoint an Auditor