FEMA compliance checks in a statutory audit confirm that foreign inward remittances received against share allotment were reported through FC-GPR within the prescribed timeline, that any transfer of shares between a resident and a non-resident was reported through FC-TRS, that external commercial borrowings were reported through the prescribed ECB return, and that any lapse in these filings has been assessed by management for the compounding or penalty exposure it creates, since a filing lapse under FEMA does not undo the underlying transaction but does create a contingent liability for compounding.
Share issuance and transfer reporting
- For any foreign investment received during the year, confirm the Foreign Currency-Gross Provisional Return (FC-GPR) was filed within the prescribed period from the date of share allotment — trace the allotment date from the board resolution, not from the date funds were received, since the filing clock runs from allotment.
- For any transfer of existing shares between a resident and a non-resident, confirm Form FC-TRS was filed and that the transfer pricing used complies with the applicable pricing guidelines for the instrument and sector.
- Where the entity is a downstream investment of a foreign-owned Indian company, check whether the indirect foreign investment reporting obligations were also triggered and met — this is frequently missed because the direct investment into the entity itself may show no foreign shareholder on its own register.
ECB and other remittance reporting
| Transaction | Filing | What the audit checks |
|---|---|---|
| Foreign investment against share allotment | FC-GPR | Filed within the prescribed window from allotment date, amount matches remittance received |
| Resident-to-non-resident (or reverse) share transfer | FC-TRS | Filed, and pricing complies with the applicable guideline for that instrument |
| External commercial borrowing drawn or repaid | ECB return | Monthly reporting kept current, end-use of funds consistent with the approved purpose |
| Advance received against export of goods/services beyond the permitted period | Follow-up with authorised dealer / RBI | Realisation period monitored, extension sought where overdue |
Regulatory requirement
Filing forms, timelines, and pricing guidelines under FEMA are prescribed by the Reserve Bank of India and revised periodically. Confirm the current master directions and timelines applicable to the specific transaction type before concluding on compliance.
A delayed or missed FC-GPR/FC-TRS filing is compoundable, but compounding is a cost and a process, not an automatic cure. Where a lapse is identified, check whether management has already approached the compounding authority or RBI, and whether the exposure has been quantified and disclosed rather than left as an unaddressed open item in the audit file.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Related parties & disclosuresIdentifying related parties: the audit starting pointA client declaration is a starting point for the related-party list, not evidence of it. How to build and cross-check the list independently.
- Audit workflow & automationSA 250: consideration of laws and regulations, and why direct vs. indirect mattersThe auditor is not a compliance officer. SA 250 draws a specific line around what they're actually responsible for noticing.
- CARO & Companies ActCARO clause 3(xvi): RBI registration, and when a company is conducting NBFC business without knowing itA company can be conducting NBFC-type business in substance — significant lending or investment activity — without ever formally describing itself that way, and still trip this clause.
- CARO & Companies ActSecretarial compliance checklist for a statutory auditorBoard meeting frequency, statutory registers and ROC filing timeliness, read as evidence of compliance culture rather than a secretarial checklist in its own right.
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