The National Financial Reporting Authority (NFRA) has convened a board meeting scheduled for November 25, where it will examine and potentially set audit standards for limited liability partnerships (LLPs), according to official sources. Representatives from the Institute of Chartered Accountants of India (ICAI), which had earlier drafted a Guidance Note on LLP financial statements, will be in attendance.
The NFRA meeting follows a two-day board discussion focused on revising Standards on Auditing 600 (SA 600) to align with International Standards on Auditing (ISA 600). SA 600 sets standards for audits of group financial statements, and these revisions are anticipated to elevate audit practices within India to international norms.
In India, LLPs with a turnover below ₹40 lakh or a contribution under ₹25 lakh are exempt from mandatory audits, as per Rule 24 of the LLP Rules, 2009, unless otherwise decided by the partners. While LLPs combine characteristics of both corporations and partnerships, current auditing standards are specific to traditional firms, with LLP-specific standards yet to be formalized.
Experts highlight the importance of tailored audit guidelines for LLPs, given their hybrid structure. NFRA, in collaboration with ICAI, is expected to propose these guidelines to the Ministry of Corporate Affairs (MCA), which would then notify them for implementation. This move is seen as part of ongoing regulatory efforts to support India's startup ecosystem, especially following the Limited Liability Partnership (Amendment) Bill in August 2021, which eased penalties to foster ease of doing business.
As LLPs increasingly gain popularity for their flexibility and limited liability, establishing distinct auditing standards for these entities will contribute to enhanced financial transparency and governance within this sector.
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