A common setup for an Indian-owned US company: a small CPA firm handles the monthly bookkeeping. When APR season arrives, someone asks, “Why not have them audit it too? They already know the numbers.” It sounds efficient. It is also where many files run into trouble. Whether one firm can do both depends on what “keeping the books” actually means, which country’s rules apply, and who makes the accounting decisions, the firm or your management.
The short answer: it depends on who makes the decisions. Professional codes do not ban bookkeeping and audit by the same firm outright for private companies. What they ban is a firm marking its own homework. The AICPA Code calls this the self-review threat: the risk that a CPA will not properly evaluate a service the firm performed and will rely on it when forming an audit judgment. If the firm built the ledger, the audit of that ledger has a blind spot. For a listed company or other public interest entity, the international code prohibits bookkeeping for an audit client. Most Indian-owned foreign subsidiaries are private, so limited, safeguarded bookkeeping is possible, and the conditions matter.
Why independence matters more for an APR. First, the AD bank relies on the report. It cannot re-audit the subsidiary, so it looks at who signed and whether that person is eligible. Second, there is no unaudited fallback. Where you control the entity, Regulation 10(4) of the Overseas Investment Regulations, 2022 requires audited statements, and a wholly owned subsidiary is controlled by definition. Third, the consequences fall on the Indian parent. A report the bank will not accept counts as an APR not filed, which puts FEMA compliance and new remittances at risk.
How the rulebooks treat it. Under the AICPA Code, bookkeeping is a non-attest service that a CPA can provide to an audit client only if the client assumes all management responsibilities, names someone with suitable skill to oversee the work, evaluates the results and accepts responsibility for them. Under the IESBA Code, bookkeeping for a non-public-interest audit client is allowed only if it is routine or mechanical and the threats are reduced to an acceptable level, for example by using people who are not on the audit team and having an independent reviewer check the work. The UK, Singapore and other codes follow the same architecture, so ask your auditor which local code governs and confirm the position in writing.
What crosses the line. Setting accounting policies, originating or changing journal entries, and approving how transactions are classified are management decisions, and a firm that makes them cannot then audit the result. Ordinary help is different: posting entries your management approved, or explaining a standard during the audit, does not usually create a problem if your management stays in charge. The test is simple. Did your finance team decide, or did the auditor decide and your team approve without understanding?
The Indian side. Section 144 of the Companies Act, 2013 bars the statutory auditor of an Indian company from providing accounting and bookkeeping services to the company, its holding company or its subsidiary company. Whether “subsidiary” reaches an overseas entity is debated, and careful firms treat it as reaching, which is the safer reading.
Compilation is not a shortcut. A compilation under US standards does not require independence because it gives no assurance. For that reason it cannot stand in for an audit where the Indian parent has control.
If you want one firm on both sides. For a small subsidiary, two separate firms is usually the cleanest answer. If you keep one, insist on separate teams, management approval of every journal entry, written engagement terms that say who owns each decision, a written independence assessment before fieldwork starts, and a short memo on the choice kept on file for the AD bank.
Read the complete guide, including the questions CFOs and AD banks ask:
https://accorppartners.com/blogs/apr/can-the-cpa-who-keeps-your-books-also-audit-them-auditor-independence-for-apr
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