Under the Indian Partnership Act 1932, there is no forcible law or any obligations for partnership firm to appoint an auditor for the keeping of the accounts and as per Income Tax Act, 1961 tax audit of partnership, the firm is mandatory if the turnover exceeds Rupees One Crore in case of business and Rupees Twenty Five Laces in case of the profession but also it is highly recommended that the partnership firm should appoint an auditor for its accounts. In these types of rules, an agreement between auditor and firm plays a very crucial role to uplift the scenario.
Important points to be considered while appointing an auditor for partnership firms.
The relationship between the form and the auditor is based on the agreement both the firm and auditor have signed. The main point is that the auditor should be fair to both of the partners even if his appointment is due by a single partner. A report is made by the auditor which he has to submit in the end where he has done his tallying, accounting and verification. Some time bookkeeping is important for maintaining accounts so this should be specifically stated in the agreement they make before the appointment. The auditor should confirm points like the nature of the business, profit sharing ration between partners, capital of the partners, salary and remuneration. Mainly the auditor should know the policy or basis of valuation of goodwill at the time of admission, retirement, and death of any partner. The above points are to be mentioned by the auditor and also includes in the agreement by the partners themselves so that there will be no problem or any disputes between either partner or the auditor as trust plays a very important role into the mechanism of a proper business.
Important provisions of this act.
An auditor should be aware of some points and set of rules which should be followed by the auditor these points can be that the auditor should know that in a partnership firm both the partners share equal amount of profit and loss and another case can be different as they agreed to share different amount of profit or loss sharing ratio. Another point is that the goodwill should be included in assets side of the balance sheet at the time of dissolution of the firm and every partner has implied authority to hold the firm for acts done in usual course of business.