Sole properties are a person who trades on his own or we can say solely he is not bound or the trader himself doesn’t have any obligation to keep an auditor for his accounts he himself is answerable to his accounts. The trader himself manages and controls business and he is able to maintain his accounts until and unless he himself decided to keep an auditor to keep the tracks or if he is unable to keep them maintained from time to time. As there is no legal compulsion for an audit of the accounts for this sole proprietor but usually business concerns get audited only when the transactions are on large scale. The rights and authority of the auditor will depend on the terms of agreement with the client.
What are the advantages of the auditor in sole proprietary concern?
If a sole proprietor appoints an auditor he can enjoy immense benefits from audited accounts as there will be the accuracy of accounts as audited accounts reveal trueness and correctness of the accounts. There will be detection and prevention of errors and frauds which will help in detecting and preventing these flaws from the accounts. It also describes the discovery of defalcations as the trader himself can be protected from any frauds done by his employer or any of the agents he has assigned for the trade or business. Auditing also helps in comparing the accounts whether they are in profit, loss or in no profit no loss situation. Just by auditing accounts one can know the trustworthiness of the employees and can check the morale of the employees which are working for him which gives a businessman an immense amount of relief or power to boost the system.
What if sole proprietorship turns into a partnership?
According to the Indian Partnership Act, 1932 there are no such obligations for the firm to have an auditor as it is made an option for the partnership firm to appoint an auditor if they wish to appoint one. The same set of rules goes with the partnership firm as of sole proprietary if they appoint an auditor there must be some mandate rules and regulations or agreement between the owners and the auditor to get there accounts audited but it is important that the auditor must refer to the Deed of that partnership firm and there is a mutual consent of both the partners to appoint an auditor for the firm.