Consolidation of Overseas Branches
While consolidating the overseas branches the auditor should examine the following aspects;
a. The various reports of the overseas branches would be received in the local currencies of the reporting countries which need to be converted into the
Indian currency.
b. The effect of reinstatement of assets and liability which is given in Accounting standard 11 (The Effects of Changes in Foreign Exchange Rates). RBI has also issued a circular for compliance of the AS 13. DBOD.BP.BC.No.76/21.04.018/2005-06) dated April 5, 2006.
c. Foreign exchange gain and loss.
d. As per AS 11 (revised 2003), the method used to translate the financial statements of a foreign operation depends on the way in which it is financed and operates in relation to the reporting enterprise. For this purpose, foreign operations are classified as either “integral foreign operations” or “nonintegral foreign operations”.
e. In terms of its circular no DBOD.BP.BC.76/ 21.04.018/2004-05 dated March 15, 2005, the RBI has prescribed that with the issuance of the said circular, there should normally be no need for any statutory auditor for qualifying financial statements of a bank for non-compliance with Accounting Standard 11 (revised 2003). Whenever specific difference in opinion arises among the auditors, the statutory central auditors would take a final view. Continuing difference, if any, could be sorted out in prior consultation with RBI, if necessary.
f. The auditor may also review the compliance with the applicable local laws and regulations of the concerned country by the overseas branches.
g. As advised by ICAI, statutory auditor has to give the total number and amount of debits/ credits arising pursuant to the Memorandum of changes submitted by them in their audit reports under the “Other Matters Paragraph”.
h. The auditor should furnish the statement of Adjustments for non-uniform accounting policies .