The National Financial Reporting Authority (NFRA) of India is set to discuss introducing audit norms for LLPs during its board meeting scheduled for 25 November.  

Currently, LLPs in India face less stringent regulatory requirements compared with companies, as they operate under the LLP Act, 2008.  

With the increasing use of LLPs across various industries, the auditing and accounting supervision authority of India is considering implementing stricter audit and financial reporting standards.  

The goal is to enhance transparency, accountability and investor protection.  

The NFRA may propose thresholds based on turnover or capital contribution, making audits mandatory for LLPs that meet these criteria.  

LLPs may be required to adhere to specific audit standards that align with those applicable to companies, including auditing financial statements, disclosures and related financial documentation. 

This is intended to promote consistency and reliability in financial reporting.  

The proposed norms are expected to include provisions for LLP auditors to ensure accountability, similar to the oversight the NFRA provides for auditors of public interest entities.  

Additionally, these norms may aim to strengthen the role of auditors in identifying and reporting discrepancies. 

The potential changes are expected to drive improvements in financial disclosure practices among LLPs, benefitting stakeholders such as creditors, investors and tax authorities.  

To ensure compliance, the NFRA may also introduce provisions for penalties or disciplinary actions for non-compliance, encouraging LLPs to adopt the proposed standards. 

These reforms are said to strengthen financial discipline, improve transparency and foster trust among stakeholders by improving the reliability of financial statements.  

This move aligns with the NFRA’s broader strategy to elevate corporate governance standards across various forms of business entities, fostering a healthier financial environment in India. 

In partnership with the Institute of Chartered Accountants of India, the NFRA is expected to propose these guidelines to the Ministry of Corporate Affairs. 

This initiative is viewed as part of ongoing regulatory efforts to support India’s start-up ecosystem, following the Limited Liability Partnership (Amendment) Bill in August 2021. 

Earlier this month, the NFRA revealed plans to review the revision of all 35 Standards on Auditing, including SA600.