Title: ICAI Floats Landmark Auditing Standards for LLPs to Boost Transparency and Accountability

ICAI Introduces Dedicated Auditing Standards for Limited Liability Partnerships (LLPs)

The Institute of Chartered Accountants of India (ICAI) has released a pioneering Exposure Draft of auditing standards tailored exclusively for Limited Liability Partnerships (LLPs), marking a significant regulatory milestone. This initiative aims to align LLP audits with the rigorous accountability and transparency norms already applicable to companies, thereby strengthening governance in the rapidly growing LLP sector in India[2][5].

Why This Move Matters: Boosting Regulatory Oversight for LLPs

LLPs have gained immense popularity in India due to their flexibility and lower compliance burden compared to companies. The surge in LLP registrations is evident from recent data:

• A record 8,723 LLPs were registered in March 2025 alone, a 62% increase compared to the previous year.
• In FY 2024, LLP registrations surged 63% year-on-year to 58,990 from 36,249 in FY 2023[2].

However, until now, LLPs were not mandated to follow specific accounting or auditing standards like companies. They were also exempt from requirements such as the Auditor’s Report Order (CARO), which governs statutory audit reports for companies. The absence of such frameworks has raised concerns about transparency and audit quality in LLPs[2].

The new ICAI draft standards seek to remedy this by prescribing for the first time auditing standards under the LLP Act, 2008. This aligns with Section 34A of the LLP Act, which mandates the central government to prescribe auditing standards for LLPs, following ICAI’s recommendations and consultation with the National Financial Reporting Authority (NFRA)[2][5].

What the Draft Auditing Standards for LLPs Include

The Exposure Draft issued by ICAI’s Auditing and Assurance Standards Board (AASB) adapts existing Standards on Auditing (SAs) with LLP-specific amendments, ensuring relevance and practical applicability. The draft incorporates amendments from six recently finalized auditing standards and revises terminology and illustrative formats to suit LLP operations[1][2][5].

Key Features of the Draft Standards:

• Contextual Terminology Updates: All auditing terminologies and definitions modified to reflect the LLP structure and governance model.
• Illustrative Formats: Customized independent auditor’s report templates and engagement letters designed specifically for LLP audits.
• Alignment with Companies’ Standards: The draft draws from the Companies (Accounting Standards) Rules, 2021, ensuring no conceptual divergence from corporate audit standards.
• Incorporation of Recent Amendments: Six recently finalized standards including SA 220 (Revised), SA 250 (Revised), SA 315 (Revised), SA 540 (Revised), and related standards on quality management (SQM 1 and SQM 2) have been factored in, reflecting global best practices[1][5].
• Minimal Conceptual Changes: The effort is to keep changes minimal to maintain consistency across company and non-company entities’ accounting frameworks, while addressing LLP-specific nuances[1].

Implications for LLPs and Auditors

These auditing standards will elevate the quality of audits for LLPs, enhancing investor confidence and regulatory oversight. For auditors, the standards provide a clearer, structured framework tailored to LLP audits, improving audit effectiveness and compliance.

The move also signals the government’s intent to balance the ease of doing business for LLPs with robust audit and accounting discipline, especially as LLPs significantly contribute to India’s business ecosystem[2].

How to Participate: Public Comments Invited Until May 1, 2025

ICAI has invited stakeholders, including chartered accountants, LLP partners, regulators, and the public, to review the Exposure Draft and provide feedback by May 1, 2025. Comments can be submitted via:

• Email to [email protected]
• Online portals on the ICAI website
• Physical submissions to ICAI offices

This consultative approach aims to further refine the standards before final notification by the Ministry of Corporate Affairs (MCA), after NFRA’s consultation, as mandated by the LLP Act[1][2][5].

Broader Regulatory Context: Accounting Standards for LLPs

Alongside auditing standards, ICAI has also finalized separate accounting standards for LLPs. These were prepared with the Companies (Accounting Standards) Rules, 2021 as a base but modified for LLP-specific frameworks. The goal is to maintain consistency while addressing legal and structural differences between LLPs and companies[1].

What Experts Say

Industry experts view this development as a critical step toward strengthening the LLP regulatory framework:

• Increased transparency and audit quality will enhance stakeholder trust.
• The standards will help auditors navigate LLP-specific challenges with clear guidance.
• This change may spur greater formalization and compliance among LLPs, attracting more investors and partners.

Frequently Asked Questions About ICAI’s LLP Auditing Standards

What is the significance of these auditing standards for LLPs?

They establish mandatory auditing norms for LLPs for the first time under the LLP Act, improving governance transparency and investor protection.

Are these standards similar to those for companies?

Yes, the draft aligns closely with corporate auditing standards with minimal conceptual changes but incorporates necessary LLP-specific terminologies and formats.

Can stakeholders suggest changes?

Yes, ICAI welcomes public comments on the Exposure Draft until May 1, 2025, to ensure the standards are practical and comprehensive.

When will these standards be implemented?

Following the public feedback and consultations, the final standards will be notified by the MCA, expected later in 2025.

Conclusion

ICAI’s floatation of auditing standards for LLPs is a landmark move designed to modernize and strengthen the oversight framework for one of India’s fastest-growing business forms. By harmonizing LLP audits with company audit requirements and tailoring them to LLP nuances, these standards promise improved transparency, accountability, and professional rigor across LLPs nationwide.

As the LLP sector continues to expand, stakeholders are encouraged to actively participate in reviewing the draft to contribute to evolving India’s auditing landscape.

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Published on April 18, 2025