AUDIT REQUIREMENT FOR LLP IN INDIA

 

What is an LLP?

LLP is a way between Company and Partnership. It takes the benefits of both i.e. less legal and regulatory formalities and a Corporate Entity form.Professionals who use LLPs tend to rely heavily on reputation. Most of them are managed by professionals who have a lot of experience and clients. By pooling their resources, the partners tend to lower the costs of doing business while increasing the LLP’s capacity for growth. They can share office space, employees and so on. Reducing costs allows the partners to realise more profits from their activities than they could individually. The partners in an LLP can also be junior paid partners with future probability of turning into normal partners. These junior partners are paid a salary and often have no stake or liability in the partnership. They are designated professionals qualified to do the work that the partners bring in. This is another way that LLPs help the partners scale their operations. Junior partners and employees take away the detailed work and free up the partners to focus on bringing in new business.LLP can be more profitable since it has the ability to bring partners in and let partners out. Because a partnership agreement exists for an LLP, partners can be added or retired as outlined by the agreement. This comes in handy as the LLP can always add partners who bring existing business with them. Usually, the decision to add requires approval from all the existing partners.

Maintenance and filing of Accounts

 An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A “Statement of Accounts and Solvency” in prescribed form shall be filed by every LLP with the Registrar every year.

Exemption from Audit

The accounts of every LLP shall be audited in accordance with Rule 24 of LLP, Rules 2009.

Such rules, inter-alia, provides that any LLP, whose turnover does not exceed, in any financial year, forty lakh rupees, or whose contribution does not exceed twenty five lakh rupees, is not required to get its accounts audited. However, if the partners of such limited liability partnership decide to get the accounts of such LLP audited, the accounts shall be audited only in accordance with such rule.LLPs have to appoint auditor within 30 days before the end of the financial year. In other words auditor has to be appointed before 1st March every year.

Appointment by designated Partners

The designated partners may appoint an auditor:

  • At any time for the first financial year but before the end of the Financial Year.
  • Within 30 days before the end of the Financial Year.

This can be done to

  • To fill a casual vacancy in the office of auditor.
  • To fill up the vacancy caused by removal of an auditor.

Appointment by Partners

If the designated partners have not appointed then the Partners can assume this responsibility.

Holding Office

An Auditor shall hold office from the day the previous auditor ceases to hold office and upto the end of the next period for appointing a new auditor, unless re-appointed.

Penalty

Any LLP which fails to comply with the requirements shall be punishable with a fine which shall not be less than Rs. 25,000 but not exceeding Rs. 5,00,000. Every designated partner shall be punishable with fine which shall not be less than Rs. 10,000 but not exceeding Rs. 5,00,000.

Annual Returns

Every LLP would be required to file annual return in Form 11 with ROC within 60 days of closer of financial year. The annual return will be available for public inspection on payment of prescribed fees to Registrar.

Documents available for public inspection in the office of Registrar

The following documents/information will be available for inspection by any person:-

  • Incorporation document,
  • Names of partners and changes, if any, made therein,
  • Statement of Account and Solvency
  • Annual Return

The fees for such inspection of an LLP is Rs 50/- and fees for certified copy or extract of any document u/s 36 shall Rs. 5/- per page.

 

For more information, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

 

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THE EVOLVING ROLE OF INTERNAL AUDIT IN GROWING COMPANIE

 

The Evolving Role of Internal Audit in Growing Companies

Without any doubts, today’s organizations face a global economic crisis of historical proportions. In response to that, management, board of directors and leaders throughout the organization are taking fresh look at virtually all aspects of the business to assess how to enhance productivity, processes and systems, yet still stay “in control.” They are starting, and very likely will continue, to think and respond differently as they determine how to operate their businesses successfully and maintain plans for long-term growth in today’s unique business environment.

As the mandate and role of internal audit continue to evolve, managements are increasingly counting on internal audit functions in their efforts for managing fraud risks and keeping organisations protected. Increasingly, the internal audit function is not to monitor and detect but also to investigate fraud incidences when they arise. The role of internal audit in fraud risk management by way of preventing, detecting and investigating fraud has amplified as a result of economic uncertainty and increased focus of certain organisation’s management on fraud risks.

Internal auditors traditionally look beyond financial risks and statements to consider wider issues such as the organisation’s reputation, growth, impact on the environment etc. The fundamental function of an internal audit team are Assurance, Assessment and Recommendations, Oversight, Advisory Services.

The changing role of Internal Audit

Internal auditing professionals not only must understand these challenges and their organization’s key objectives, but also ensure that amid the many organization wide changes taking place on almost a daily basis, key controls and processes are adequately addressing these changes and the new risks that emerge, and are functioning as intended. Internal audit plays a critical role in helping companies successfully “manage the change” by providing assurances that with every new process, procedure and initiative, any significant new risks that emerge are identified, monitored and managed effectively, so that the enterprise is protected on an on-going basis and to a level that satisfies management and the board.

An effective audit planning process that focuses on organisational strategic imperatives and key business risks will identify an appropriate blend of advisory and assurance reviews. The updating of the audit plan can no longer be an annual process. The audit plan must be refreshed regularly (e.g., quarterly) and with triggering events. Leading functions are developing a ‘3 + 9’ plan — a three month frozen window and nine month fluid plan. For those that do not, the risk of unpreparedness, of being too slow to react to the changing risk environment or market events is simply too great, leaving organisations perplexed to react to events, some of which include:

  • Transactions (mergers, acquisitions, carve-outs or divestiture)
  • New product launch or retirement
  • New market entry
  • Patent expiry
  • Litigation

Mandate for Internal Audit

    • Strategic and valued advisor:The Internal Audit function serves as a subject-matter resource to business management around strategic initiatives, challenges and changes in the organisation. The function has the people, knowledge and experiences to effectively provide this level of service.
    • Business insight: In addition to covering the ‘basics,’ the Internal Audit function is designed to provide high-quality, relevant business insight as an integral part of its activities. Business insight is not a by-product, but an explicit outcome from the function’s activities.
    • Control and compliance monitoring structure:Internal Audit functions should be focused on evaluating the design and the effectiveness of internal controls in the areas outlined, in their charter or mandate. This also includes focusing on compliance with key regulations and policies.

Also, internal audit must think expansively when seeking ways to add value to the organization. Too often, we find internal audit functions stop short of making recommendations that could create value for the organization for fear of overstepping their place. However, “consulting” is part of the Institute of Internal Auditors’ definition of internal auditing, and we believe that appropriately empowering this function provides management with greater opportunities to create value without compromising independence.

At Gapeseed Consulting we work with your organization, virtually of any size to assist you with your internal audit activities. We believe the Internal Audits are now required to find different ways to increase shareholder value and increase the attractiveness of the company to investors, senior executives, especially the risk officers and advisors on board.

Internal Audits are required for all set of businesses which are emerging as progressive business units, our Internal auditors partner and build relationships with the client business in order to keep a finger on the pulse of the organization and thereby act as your growth partners.

To know more about our Internal Auditing services click here or get in touch with our team at, ranu@gapeseedconsulting.com

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Why Audits are important for business?

Because they serve important functions for the company and add value for its people.

When we refer to start-up or small businesses, in order to keep the budget low, they prefer to hire individuals to take care of their accounts and finances

But most of the time, they miss out on the fact that auditing is an important means of evaluating the effectiveness of a company’s internal controls and it is of utmost importance to let an expert conduct internal audits for financial records and an external one to review books. Performing audits of individual departmental finances or overall accounting function is necessary to determine if your business numbers are accurate to become aware of – obtaining reliable financial reporting, preventing fraud, learning to improve processes and procedures, minimizing the cost of the capital. And not only audits are important for the overall growth of the company, the process is essential in order to gain a fair perspective on the company’s financial statements. In fact potential investors and creditors look into these financial statements before deciding to invest in a particular business. This very aspect is very crucial for small business holders. In short internal and external audit processes contribute to a company’s audit system in important ways. It’s time we find out how.

Cut the business cost

In the beginning as we mentioned, for small businesses, managing the finance and cost cutting is the most important reason why they don’t consider a proper audit system to take care of the finances. It’s a wrong perception. The cost of capital is important for any company, big or small. And a strong audit system actually reduces various forms of risk in an enterprise which can add on to the cost of the company. Audit systems help to reduce the risk of material misstatement in financial reporting, the risk of fraud and misappropriation of assets, the risk of optimal management due to insufficient information on its operations and other forms of risks.

Meet your business goals

When we run a business, we keep certain goals and work hard to pursue and attain them. Having an effective audit system ensures you meet them consistently. Business processes need various forms of internal control to facilitate supervision and monitoring, prevent and detect irregular transactions, measure ongoing performance, maintain adequate business records and to promote operational productivity. A skilled audit system not only helps to take control of all this but helps to learn ways to improve business processes and procedures. A team of experts can help to improve cash flow, reduce debt-service interest, depreciate assets etc. which further improves the overall capital management process of the business.

Authenticate your business deals

If you need credit or loan or want investors/creditors to invest on your business, a potential audit system can make the process smooth because such transactions require accurate financial statements of the company. When it comes to business deals like preliminary loan or investment request, specific financial reports can be presented with the help of an internal audit system. Others, such as a negotiated business sale, might be contingent on the results of an external audit. This system lets you present financial data verified by an independent third-party professional accounting person or firm that shares or explains your numbers with others only as you direct.

Safeguard your business from frauds

Business deals and transactions are vital to any company and preventing them from getting misplaced or protecting them against frauds can be a task but not when you have an audit system functioning for you. Recurring analysis of a company’s operations and maintaining rigorous systems of internal controls can prevent and detect various forms of fraud and other accounting irregularities. Audit professionals assist in the design and modification of internal control systems the purpose of which includes fraud prevention.

These were some of the key features of how an audit system helps to uplift the overall growth of the business. If you want such a potent system to manage the finances of your business, you simply need to get in touch with us.

For more information on Audit, feel free to reach us on, info@gapeseedconsulting.com or call +91-9599444639/+91-9599444630

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