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Foreign Office - Account & Audit

Books of Account

Foreign offices are required to maintain books of account with respect to:

1. All sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place;
2. All sales and purchases of goods by the company;
3. Assets and liabilities of the company;

The Book of accounts shall give a true and fair view of the state of affairs of the company and shall be kept at the principal place of business in India.

Method of Accounting

Foreign Offices are required to maintain their books of account on accrual basis and the double entry system of accounting. The fundamental assumption of going concern shall also be followed.

Financial Statements

Foreign Offices are required to prepare annual financial statements which would consist of the following:

1. A Balance Sheet – to give a true and fair view of the state of affairs of the company as at the end of the financial year; and
2. A Profit and Loss Account – to give a true and fair view of the profits or losses of the company for the financial year.

The Profit and Loss Account and the Balance Sheet are to be prepared in format specified under the Companies Act 1956 and in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India and the requirements of the Indian Companies Act, 1956.

Fiscal Period

The fiscal period which is generally followed both under the Companies Act, 1956 and the Income Tax Act 1961 is 1st April-31st March every year.

Audit Requirements

Statutory Audit

Every foreign office is required to get its annual accounts audited by the statutory auditor. Only a Chartered Accountant in practice, who is member of the Institute of Chartered Accountants of India, can be appointed as Statutory Auditor

Tax Audit

In case the foreign offices Where the total sales, turnover or gross receipts of the business of the Company exceed Rs.40 Lac in any financial year of the company, than a tax audit report is to be submitted to the tax authorities alongwith the Return of Income of the company.

Cost Audit

The Central Government in case of foreign offices engaged in production, processing, manufacturing and mining activities , may direct the foreign office to it cost accounts and records audited by a Cost Auditors.

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