9911796707
TMI BlogLIMITED LIABILITY PARTNERSHIP-PART-XV - MAINTENANCE OF BOOKS OF ACCOUNT, OTHER RECORDS AND AUDITX X X X Extracts X X X X X X X X Extracts X X X X ..... LIMITED LIABILITY PARTNERSHIP-PART-XV - MAINTENANCE OF BOOKS OF ACCOUNT, OTHER RECORDS AND AUDIT - By: - Dr. Sanjiv Agarwal - Limited Liability Partnership - LLP - Dated:- 13-4-2010 - - Section 34 of LLP Act, 2008 provides that every LLP is required to maintain the prescribed books of accounts and a Statement of Account and Solvency which is to be filed with the Registrar every year. Section 34 LLP Act, 2008 seeks to provide for requirement relating to maintenance of proper books of account by the LLP relating to its affairs for each year and for filing of an annual Statement of Account and Solvency with the Registrar in such form and manner as may be prescribed. This clause seeks to empower the Central Government to prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules for the manner in which the accounts of LLPs shall be audited, it also seeks to empower the Central Government to grant exemption to any class or classes of LLPs from audit requirement. It also seeks to provide for imposition of a fine of not less than twenty-five thousand rupees but which may extend to five lakh rupees for LLP and of a fine of not less than ten thousand rupees but which may extend to one lakh rupees for designated partner of LLP, in case the LLP fails to comply with these provisions. This section prescribes the requirements relating to maintenance of financial records by an LLP, audit of such records and filing thereof. The provisions of this section are to be read with r 24 of the LLP Rules . Maintenance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts [ Section 34(1) (4) ] Section 34(1) prescribes the requirement of maintaining appropriate books of accounts by an LLP and s 34(4) provides regarding the audit requirements thereof. As per these provisions, a limited liability partnership shall maintain such proper books of account: (1) As may be prescribed relating to its affairs for each year of its existence—In this regard, r 24(1) prescribes that every LLP shall keep accounting records which are sufficient to show and explain the limited liability partnership's transactions and are such as to— (a) disclose with reasonable accuracy, at any time, the financial position of the limited liability partnership at that time, and (b) enable the designated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners to ensure that any Statement of Account and Solvency prepared under this rule complies with the requirements of the Limited Liability Partnership Act . Rule 24(2) further prescribes that the accounting records shall in particular contain: (a) particulars of all sums of money received and expended by the limited liability partnership, and the matters in respect of which the receipt and expenditure takes place, and (b) a record of the assets and liabilities of the limited liability partnership, (c) statements of cost of goods purchased, inventories, working- progress, finished goods and cost of goods sold, (d) any other particulars which the partner may decide. (2) On cash basis or accrual basis and according to double ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry system of accounting—According to the guidance notes issued by the Institute of Chartered Accountants of India, there are two basic features of the system of accounting. First, revenue means revenue earned, whether received in cash for the time being or not; second, costs are incurred when they become payable, whether actually paid or not. How these methods are to be applied by an enterprise constitutes its accounting policy. What is more important is the substance of the financial position of the company and not the forms and the formats through which that substance is presented as a true and fair view. (3) To be maintained at its registered office for such period as may be prescribed—In this regard, r 24(3) prescribes that ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting records which a LLP is required to keep shall be preserved for eight years from the date on which they are made. Audit Requirements Section 34(4) provides that the accounts of limited liability partnerships shall be audited in accordance with such rules as may be prescribed—in this regard r 24(8) to r 24(19) prescribes the relevant provisions as discussed below— An LLP is required to get its accounts audited unless it is exempted from the audit as per the provisions relating to such exemption. Authority to appoint auditor. — Rule 24(11) provides that the designated partners may appoint an auditor or auditors: (a) at any time for the first financial year but before the end of the first financial year; or (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at least 30 days prior to the end of each financial year (other than the first financial year); or (c) to fill a casual vacancy in the office of auditor including in the case when the turnover of a LLP exceeds Rs 40 lakhs and contribution thereof exceeds Rs 25 lakhs; or (d) to fill up the vacancy caused by removal of an auditor. Where the designated partners failed to make an appointment, the partners may appoint an auditor or auditors. Qualification of an auditor .—Only a person who is a chartered accountant in practice shall be qualified for appointment as auditor of a limited liability partnership. Period for which auditor is to be appointed .—An auditor or auditors of a limited liability partnership shall be appointed for each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year of the LLP, unless the LLP is exempt from the provisions of audit. Term of office of an auditor .—An auditor or auditors of an LLP shall hold office in accordance with the terms of their appointment, and shall continue to hold office till the period the new conditions are appointed or they are re-appointed. Where no auditor has been appointed by the end of the next period, any auditor in office immediately before that time is deemed to be re-appointed at that time, unless: (a) the limited liability partnership agreement requires actual re-appointment, or (b) the majority of partners have determined that he should not be re-appointed and have given a notice to this effect to the LLP A notice specified above: (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be in hard copy or electronic form, and (b) must be authenticated by the person or persons giving it. Remuneration of auditor. —The remuneration of an auditor appointed by the limited liability partnership may be fixed by the designated partners or by following the procedure as laid down in the Limited liability partnership agreement. Removal of auditor by LLP .—The partners of a limited liability partnership may remove an auditor from office at any time by following the procedure as laid down in the limited liability partnership agreement. However, where the limited liability partnership agreement is silent on this matter, consent of all the partners shall be required for removal of the auditors from his office. Resignation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by auditor .—An auditor of an LLP may resign his office by depositing a notice in writing to that effect at the LLP's registered office. The notice is to be accompanied by the statement of the circumstances connected with his ceasing to hold office. Further, in case an auditor is unwilling to be reappointed, he shall give a notice in writing to that effect at the LLP's registered office, not less than 14 days before the end of the time allowed for appointing the new auditor. Exemption from Audit to an LLP There are two fold provisions exempting an LLP from audit— one set of exemption provisions is provided under the rules and the other provision is provided as a proviso to sub-s (4) to s 34 . Exemption from Audit as per the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LP Rules 2009 .— Rule 24(8) of the rules provides that an LLP shall be exempt from the audit of its accounts if: (a) its turnover does not exceed, in any financial year, forty lakh rupees; or (b) its contribution does not exceed rupees twenty-five lakh. A limited liability partnership would be entitled to above exemption from audit only if its accounts contain a statement by the partners to the effect that the partners acknowledge their responsibilities for complying with the requirements of the r 24 with respect to the preparation of books of accounts and the certificate in the Form 8. Exemption from Audit as per Section 34(4) of the Act . —The Central Government may, by notification in the Official Gazette, exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any class or classes of limited liability partnerships from the requirements of audit. Statement of Account and Solvency [ Section 34(2) (3) ] The LLP law requires every limited liability partnership, within a period of six months from the end of each financial year, to prepare a Statement of Account and Solvency for every financial year as at the last day of the said financial year in Form 8, and to file it within 30 days from the end of such six months period. This statement is to be signed on behalf of the LLP by designated partners of the LLP. Further, every designated partner of the limited liability partnership at the time the Statement of Accounts and Solvency are approved and signed shall be taken to be a party to their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval unless he shows that he took all reasonable steps to prevent their being approved and signed. The statement of Accounts and Solvency filed by an LLP shall be available with the registrar for public access and inspection. Penalty [ Section 34(5) ] The penalty imposed for non-compliance of this section is twin fold—LLP as well as designated partners are liable to penalty for contravention of this section. The provision prescribes that any LLP which fails to comply with the provisions of this section shall be punishable with fine which shall be minimum of twenty-five thousand rupees but which may extend to five lakh rupees and every designated partner of such limited liability partnership shall be punishable with fine which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be minimum of ten thousand rupees but which may extend to one lakh rupees. = = = = = = - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
