An LLP must generally get its accounts audited when its annual turnover exceeds ₹40 lakh or its contribution exceeds ₹25 lakh. The auditor must be a chartered accountant in practice. Designated partners ordinarily make the appointment: for the first financial year, before that year ends, and for later years, at least 30 days before year-end. LLPs below both thresholds may still appoint an auditor voluntarily where the LLP agreement, lender, investor or partners require independent financial assurance.
The most important audit decision is not which chartered accountant to appoint. It is whether the LLP has correctly measured the two figures that determine audit applicability: annual turnover and total contribution.
An LLP can remain below the turnover threshold but cross the contribution threshold, or the reverse. In either case, assuming that "small operations" automatically mean "no audit" can leave the annual accounts and MCA filing process incomplete.
What an auditor does for an LLP
The LLP Act requires every LLP to maintain proper books of account and prepare a Statement of Account and Solvency. Where audit applies, an independent chartered accountant in practice examines the financial records and reports on the accounts in accordance with the applicable legal and professional requirements.
The audit ordinarily involves reviewing accounting records, balances, income and expenditure, assets and liabilities, supporting documents and material disclosures. The auditor's role is to provide independent assurance; responsibility for maintaining complete and correct books remains with the LLP and its designated partners.
Designated partners remain responsible for the LLP's books, records, statements and statutory filings. An auditor verifies and reports; the auditor does not create missing transactions or approve undocumented balances on behalf of the LLP.
When is an LLP audit mandatory?
Section 34(4) of the Limited Liability Partnership Act permits the Central Government to prescribe the audit requirements. Rule 24 provides an exemption only where the LLP remains within both specified limits.
| Annual position | Audit result | Reason |
|---|---|---|
| Turnover does not exceed ₹40 lakh and contribution does not exceed ₹25 lakh | Statutory audit generally not required under Rule 24 | The LLP remains within both exemption limits. |
| Turnover exceeds ₹40 lakh | Audit required | Crossing the turnover threshold is sufficient. |
| Contribution exceeds ₹25 lakh | Audit required | Crossing the contribution threshold is sufficient even where turnover is lower. |
| Below both thresholds, but LLP agreement or lender requires audit | Voluntary or contractual audit | The statutory exemption does not prevent partners from obtaining an audit. |
The Rule 24 test is framed around turnover or contribution exceeding the stated amount. An LLP exactly at a threshold should still verify the current rule text and the correct computation of the underlying figure before concluding that it is exempt.
The TargoLegal LLP Audit Decision Test
Legal framework
Section 34 of the LLP Act, 2008
Section 34 requires the LLP to maintain prescribed books of account, prepare a Statement of Account and Solvency and have its accounts audited in accordance with the rules. The section also places responsibility on designated partners for compliance with the statutory financial-disclosure requirements.
Rule 24 of the LLP Rules, 2009
Rule 24 sets out the practical audit threshold, the qualification of the auditor, appointment responsibility, appointment timing and remuneration arrangements.
The LLP agreement
The LLP agreement may allocate authority between designated partners and partners, prescribe internal approval steps, require voluntary audit or state how the auditor's remuneration is fixed. The agreement cannot remove a statutory audit obligation once the LLP crosses the prescribed threshold.
Who can be appointed as LLP auditor?
Rule 24 states that a chartered accountant in practice is qualified for appointment as auditor of an LLP. The appointment should therefore be made to an individual practising chartered accountant or an eligible audit firm acting through a practising chartered accountant.
Practical independence checks
Before appointment, the LLP should confirm that the proposed auditor can accept the engagement under applicable professional standards and ethical requirements. Discuss financial interests, business relationships, non-audit services, unpaid fees and other circumstances that may affect independence.
Obtain the auditor's written acceptance, membership and firm details, engagement partner information and confirmation that the audit can be conducted and signed by an eligible chartered accountant in practice.
Time limit for appointment
For the first financial year, designated partners may appoint the auditor at any time before the end of that financial year. For subsequent financial years, the auditor should ordinarily be appointed at least 30 days before the end of the financial year.
For an LLP with a 31 March year-end, the internal target should be set early enough to complete eligibility checks, acceptance, resolution and audit planning before the final 30-day period begins.
Step-by-step procedure to appoint an LLP auditor
Check audit applicability
Review final or reliable projected turnover and total contribution. Document both figures even if the LLP appears exempt.
Review the LLP agreement
Confirm who may approve the appointment, voting requirements and the process for fixing remuneration or changing auditors.
Select an eligible auditor
Choose a chartered accountant in practice with suitable capacity, sector experience and independence.
Obtain written acceptance
Record the auditor's willingness, eligibility, scope, reporting framework, engagement partner and proposed fee.
Approve the appointment
Pass a designated-partner resolution or use the partner fallback route where applicable. State the financial year and remuneration authority clearly.
Issue an engagement letter
Define the audit scope, management responsibilities, records required, timetable, communication process and fee terms.
Prepare the audit file
Provide trial balance, ledgers, bank records, invoices, tax returns, partner contribution records, agreements and material supporting schedules.
Coordinate annual filing
Ensure audited accounts, designated-partner approvals and the information used in Form 8 are consistent before filing.
Documents and records to keep
How auditor appointment connects with Form 8
Section 34 requires the LLP to prepare and file its Statement of Account and Solvency. Rule 24 prescribes the filing framework, and the MCA uses LLP Form 8 for this statement.
Where audit is mandatory, the figures and disclosures used in the annual filing should align with the audited accounts. The LLP should not wait until the Form 8 due period to discover that the auditor was not appointed, the books are incomplete or partner contribution records do not match MCA data.
Reconcile the financial statements, partner contribution, solvency declaration, contingent liabilities and statutory dues before the designated partners sign the annual filing.
Removal, resignation and casual vacancy
An auditor may resign, become ineligible or be replaced. The LLP should follow Rule 24, its agreement and the engagement terms, and should document the effective date and reason for the change.
Where the vacancy arises close to year-end or during the audit, appoint a replacement promptly and arrange an orderly handover of records, opening balances, audit observations and unresolved matters.
Keep the resignation or removal communication, approving resolution, successor appointment and handover correspondence in the LLP's compliance records.
Common mistakes
1. Checking only turnover
Contribution is a separate audit trigger. An LLP with low revenue may still require audit because its contribution exceeds ₹25 lakh.
2. Treating projected figures as final
Year-end adjustments, credit notes, unbilled revenue or partner contribution changes can alter the audit conclusion. Recheck the final books.
3. Appointing too late
The auditor needs time to plan, obtain records, verify balances and resolve discrepancies. A last-minute appointment can delay annual filing.
4. Using company-audit rules without checking LLP law
Company auditor appointment, rotation and AGM concepts should not be copied automatically into an LLP process.
5. Assuming Form 8 preparation is the audit
Form 8 is a statutory filing. It does not replace audit procedures or the auditor's report where audit is mandatory.
6. Ignoring the LLP agreement
The agreement may contain voting, remuneration, lender-consent or voluntary-audit requirements that apply in addition to Rule 24.
7. Leaving partner contribution unreconciled
The audit threshold and annual filing rely on accurate contribution records. Reconcile the agreement, MCA filings and books.
Confirm audit applicability before year-end
TargoLegal can help review the LLP's turnover and contribution, organise the auditor appointment records and coordinate the annual compliance file with the LLP's accounting and filing team.
Request LLP compliance supportFrequently asked questions
Is audit mandatory for every LLP?
No. An LLP is generally exempt where turnover does not exceed ₹40 lakh and contribution does not exceed ₹25 lakh. Crossing either threshold makes audit mandatory under Rule 24.
Who can audit an LLP?
A chartered accountant in practice is qualified for appointment as auditor of an LLP.
Who appoints the LLP auditor?
Designated partners ordinarily make the appointment. If they fail to act within the prescribed period, the partners may use the fallback appointment route under Rule 24.
When is the first auditor appointed?
The first auditor may be appointed at any time before the end of the LLP's first financial year.
When is the auditor appointed for later years?
The appointment should ordinarily be completed at least 30 days before the end of each financial year.
Can an exempt LLP obtain a voluntary audit?
Yes. Partners may choose a voluntary audit, and an audit may also be required by the LLP agreement, a lender, investor or commercial contract.
Is auditor rotation mandatory for every LLP?
The LLP audit framework does not automatically apply the company-law auditor-rotation regime to every LLP. The LLP should follow the LLP Act, LLP Rules, its agreement and any contractual requirement.
Does the auditor appointment require a separate MCA appointment form?
The LLP Rules focus on a valid internal appointment and audit of accounts. The auditor's certification and audited information become relevant to the annual financial filing, particularly Form 8 where audit applies. Check the current MCA form workflow before filing.
Research sources
- India Code — Limited Liability Partnership Act, 2008, including section 34 on accounts, solvency and audit.
- Ministry of Corporate Affairs — MCA portal for current LLP filing services and form requirements.
- Institute of Company Secretaries of India — FAQs on Limited Liability Partnerships, including its summary of Rule 24 audit thresholds, auditor eligibility and appointment timelines.
- India Code — subordinate legislation under the LLP Act, including the Limited Liability Partnership Rules.
