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Analyzing Foreign Financial Statements
There are several other traps to avoid when analyzing foreign financial statements. These include:
- Most creditors have no idea about the standards of training or independence required of auditors in foreign countries.
- Many foreign countries do not have the anything approaching the number of accounting and auditing rules as are in effect in the United States. Consequently, credit professionals in many cases cannot accuracy of financial statements presented by a foreign customer even when the statements are audited.
- Even when statements have been audited, it is usually difficult to know the scope of the audit, or how rigorous the auditor is required to be
- The statements will be denominated in a foreign currency, not in US dollars, necessitating currency conversions.
- In many countries, a company will have several sets of books - each for different purposes. Chances are that if a customer has multiple sets of books that they will share with a potential creditor the statements that make the company look the most creditworthy.
© 2011 by Michael C. Dennis. All Rights Reserved. Mr. Dennis is the author of "1001 Collection Tools and Tips" and can be reached by email at mcdennis13@yahoo.com