Audit of overseas subsidiary as per RBI Not. 400 dt. 22-Aug-2022

[Raam Srinivasan Swaminathan Kalpathi]

As per the aforementioned notification every overseas subsidiary have to submit APR alongwith their audited accounts.  As our companys overseas subsidiary was exempted from audit under the host country jurisdiction we got the accounts audited by resident auditors who furnished their audit report as per SA 800.

The authorised dealer (AD) bank (scheduled private bank) to whom we submit the APR is now insisting that the audit report of the subsidiary must carry the following sentence under Other Matters, viz.

"We are allowed to audit the foreign entity as per the host country requlations and the audit of the foreign entity has been conducted as per host country regulations."

Is it correct for a Chartered Accountant to state this as part of their audit report?  Request the views of experts.  Thanks

AI Summary

Audit of overseas subsidiary: auditor should not claim host country authorization or compliance when audit is under SA 800.
A chartered accountant should not state that they are "allowed" to audit a foreign entity under host country regulations or that the audit was conducted under those regulations when the subsidiary is exempt from statutory audit and the engagement is a special purpose audit under SA 800 for FEMA/APR. Such assertions are factually incorrect and risk breaching auditing standards and the professional code of ethics. The acceptable approach is to disclose that the audit was performed under ICAI Standards, including SA 800, for the limited purpose of FEMA/APR, and to obtain any host country authorisation confirmation from management or local counsel.