Applicability and Purpose

• Internal audit is not mandatory under LLP Act by default

• Required if mentioned in LLP agreement or partner resolution

• Ensures financial transparency and internal control checks

• Helps detect irregularities and improves operational efficiency

• Often adopted voluntarily by growing or investor-backed LLPs

Appointment of Internal Auditor

• Partners can appoint internal auditor through mutual resolution

• Auditor can be a Chartered Accountant or financial expert

• Terms of audit must be defined clearly in engagement letter

• Confidentiality and independence must be maintained by the auditor

• Appointment should be recorded in LLP’s meeting minutes

Audit Planning and Scope

• Auditor prepares audit plan based on LLP’s structure and size

• Scope may include finance, operations, compliance, and risk management

• Areas like cash flow, expenses, payroll, and contracts are covered

• Risk-prone functions are prioritized during audit cycle

• Partners can define periodicity—monthly, quarterly, or annually

Execution and Reporting

• Auditor reviews records, books, vouchers, and agreements

• Verifies statutory compliance and checks internal controls

• Findings are documented in a formal internal audit report

• Report is submitted to designated partners for action and review

• Suggestions for improvement and risk mitigation are included

Post-Audit Follow-Up

• LLP must discuss audit findings in partner meetings

• Implement corrective actions based on audit recommendations

• Maintain records of compliance with audit suggestions

• Use audit outcomes to improve policies and internal systems

• Repeat audit periodically to ensure continuous governance improvement