Introduction

The Companies Auditor’s Report Order (CARO) is a regulatory framework issued by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013, which mandates specific disclosures in the audit reports of companies. While Limited Liability Partnerships (LLPs) are governed by the LLP Act, 2008, and not the Companies Act, there is often confusion regarding the applicability of CARO to LLPs. As per current regulatory provisions, CARO does not apply to LLPs. However, LLPs are still subject to audit requirements under the LLP Act, and auditors follow generally accepted auditing standards. This article defines the scope of audit for LLPs and clarifies the non-applicability of CARO while highlighting parallel compliance requirements.

Applicability of CARO

The Companies Auditor’s Report Order (CARO) is applicable only to companies registered under the Companies Act, 2013, including private limited, public limited, and certain types of specified companies. LLPs are explicitly excluded from the scope of CARO, as they are governed by a separate legal framework. Therefore, auditors conducting statutory audits of LLPs are not required to include CARO-based reporting in their audit reports.

Audit Requirement Under LLP Act

While CARO is not applicable, the LLP Act, 2008, mandates an audit for LLPs based on certain financial thresholds. An LLP must get its accounts audited if:

• The annual turnover exceeds ₹40 lakh, or
  
• The capital contribution exceeds ₹25 lakh
  If either condition is met in a financial year, a Chartered Accountant in practice must audit the LLP’s accounts, and an audit report must be attached to Form 8 (Statement of Account and Solvency).
  

Nature of Audit Report for LLPs

Since CARO is not applicable, the audit report for LLPs does not follow the specific reporting clauses required for companies. Instead, the auditor issues a standard audit report in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India (ICAI). The report provides an opinion on whether the financial statements give a true and fair view of the LLP’s financial position and are free from material misstatements.

Filing of Financial Statements Post-Audit

After the audit is completed, the LLP must file its financials along with the auditor’s report through Form 8 by 30th October of the assessment year. Non-compliance with this requirement attracts a penalty of ₹100 per day. Although not as elaborate as company filings under CARO, this ensures a basic level of financial transparency and accountability for LLPs.

Tax Audit Requirements for LLPs

If an LLP’s turnover exceeds ₹1 crore in a business or ₹50 lakh in a profession, then Section 44AB of the Income Tax Act requires a tax audit, irrespective of the LLP Act’s audit requirement. This audit must be conducted by a Chartered Accountant and reported through Form 3CA and 3CD while filing income tax returns. This tax audit is separate and in addition to the audit required under the LLP Act.

Voluntary Audits in Smaller LLPs

Even if an LLP does not meet the mandatory audit thresholds, it may voluntarily opt for an audit. Many LLPs, especially those seeking funding, partnerships, or bidding for tenders, undertake a voluntary audit to enhance credibility, improve internal controls, and maintain financial discipline. These audits are conducted based on ICAI’s general audit standards, not CARO.

Audit Focus Areas in LLPs

In the absence of CARO, LLP audits focus on:

• Verification of books of accounts and vouchers
  
• Examination of partner contributions and drawings
  
• Assessment of asset valuation and depreciation
  
• Compliance with filing obligations and tax provisions
  
• Risk evaluation and internal control recommendations
  Although not standardized like CARO reports, such audits still ensure financial oversight and integrity.
  

Compliance Assurance Without CARO

Though LLPs are not covered under CARO, their audits—when properly executed—offer sufficient assurance to stakeholders such as banks, regulators, and tax authorities. The use of standard audit procedures and adherence to accounting standards fill the gap left by the absence of CARO and ensure that LLPs remain legally and financially compliant.

Conclusion

While the Companies Auditor’s Report Order (CARO) does not apply to LLPs, the audit requirements under the LLP Act and Income Tax Act ensure that LLPs meet essential financial compliance standards. Statutory audits under the LLP framework, combined with general auditing practices, offer a reasonable level of assurance to stakeholders. LLPs must understand that although they are exempt from CARO, maintaining transparency through proper auditing and financial disclosures is key to building credibility, attracting investment, and sustaining business success.

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