An auditor is a person who makes an independent report to a limited liability partnership’s members as to whether its annual accounts have been properly prepared in accordance with the Act. The report must also say if a limited liability partnership’s accounts give a true and fair view of its state of affairs and profit and loss for the year. Most limited liability partnerships are required to have their accounts audited - see question below.

Must all limited liability partnerships accounts be audited?

No. If they qualify for exemption and wish to take advantage of it, most small limited liability partnerships and dormant limited liability partnerships do not have to have their accounts audited.

How is an auditor appointed?

The designated members appoint the auditor of the limited liability partnership annually. The first auditor must be appointed before the end of the financial year for which they were appointed. Thereafter, an auditor must be appointed or re-appointed within two months of the approval of the accounts for the preceding financial year.

What does an auditor do?

The auditor will check the accounts and accounting records of the limited liability partnership and prepare a report for the limited liability partnership’s members.

For financial years beginning on or after 1 January 2005, the auditors’ report must include:

1. An introduction identifying the accounts that were the subject of the audit and the financial framework that has been applied in their preparation (i.e. whether UK GAPP or IAS as adopted for use in the EU).
2. A description of the scope of the audit identifying the accounting standards used in the audit.
3. A statement as to whether in the auditors’ opinion the accounts have been properly prepared in accordance with the Companies Act (and, if appropriate, Article 4 of the IAS Regulation).
4. A statement as to whether the accounts, in accordance with the relevant financial reporting framework, give a true and fair view of the limited liability partnership’s financial affairs.
5. The auditors’ report may be either unqualified or qualified and must include a reference to any matters to which the auditors’ wish to draw attention by way of emphasis without qualifying the report.

The auditors’ report delivered to the registrar must be signed by the auditors. For financial years beginning on or after 1 January 2005, the auditor’s report must also be dated.

If, in the auditor’s opinion, the accounts do not comply, the auditor will say so in the report.

Can my accountant be my auditor?

An auditor must be independent of the limited liability partnership; therefore, a person cannot be appointed as an auditor if they are:

1. a member or employee of the limited liability partnership or an associated undertaking;
2. a partner or employee of such a person, or a partnership of which such a person is a partner.

If your accountant does not fall into one of the above categories and if he or she is a Registered Auditor supervised by a recognised supervisory body, then he or she may act as the limited liability partnership’s auditor.

What and who are recognised supervisory bodies?

These are bodies recognised by the Professional Oversight Board for Accountancy as having rules designed to ensure that auditors are of the highest professional competence. Each recognised body has strict regulations and a disciplinary code to govern the conduct of their registered auditors. The five recognised bodies are:

1. The Institute of Chartered Accountants of Scotland
   21 Haymarket Yards
   Edinburgh EH12 5BH
   Tel: 0131 347 0100
2. The Institute of Chartered Accountants in England and Wales
   Professional Standards Office
   Silbury Court
   412-416 Silbury Boulevard
   Central Milton Keynes
   MK9 2AF
   Tel: 01908 248100
3. The Institute of Chartered Accountants in Ireland
   Chartered Accountants House
   87-89 Pembroke Road
   Dublin 4
   Tel: 0035 3166 80400
4. The Association of Chartered Certified Accountants
   64 Finnieston Square
   Glasgow G3 8DT
   Tel: 0141 582 2000
5. The Association of Authorised Public Accountants
   10 Lincoln’s Inn Fields
   London
   WC2A 3BP
   Tel: 020 7396 5954

Is an auditor only concerned with annual accounts and accounting records?

Yes. However, there is nothing to stop you employing an auditor for other purposes, such as keeping the books or compiling the tax return, provided he or she does not take part in the management of the limited liability partnership. You should agree an engagement letter that sets out the auditor’s duties. For instance, the limited liability partnership may want the auditor to prepare a management report after an audit, listing all the faults that were found even if they have been corrected.

Can an auditor be removed?

Yes. The designated members of a limited liability partnership may remove an auditor from office at any time during his or her term of office or decide not to re-appoint the auditor for a further term. They must give the auditor notice of their intention. The auditor then has the right to make a written response and require that it be sent to the limited liability partnership’s members.

If an auditor ceases for any reason to hold office, he or she must deposit a statement at the limited liability partnership’s registered office. The statement should set out any circumstances connected with the ceasing to hold office that the auditor considers should be brought to the attention of the members and creditors of the limited liability partnership.

If there are any such circumstances, the limited liability partnership must send a copy of the statement to all the members of the limited liability partnership unless a successful application is made to the court to stop this. If the auditor does not receive notification of an application to the court within 21 days of depositing the statement with the limited liability partnership, the auditor must within a further seven days send a copy of the statement to Companies House for the limited liability partnership’s public record.

If there are no such circumstances, the auditor must deposit a statement with the limited liability partnership to that effect. This statement need not be circulated to the members.

Tags: appointment of auditors, llp, removal of auditors