Mitra Corporation is headquartered in the United States and is owned entirely by U.S. investors. However, a large portion of Mitra's manufacturing operations are located in India.

"Since all of our shares are owned entirely by U.S. investors, in addition to our corporate office being here in the States, the company's functional currency for financial reporting purposes should be the U.S. dollar," proclaims Timothy Walker, the company's CEO, to the CFO, John Hara.

"But Timothy, our Indian subsidiary's primary operating environment is India since we source our raw materials there, set out prices based on market conditions in India, and finance the operations from loans in Indian rupees obtained from local banks. That is why we must use the Indian rupee as our functional currency."

1. What are the consequences to Mitra's reported income numbers of choosing the U.S. dollar or the Indian rupee as the functional currency of its Indian subsidiary? Do the auditors of Mitra Corporation have a role in the functional currency that the company chooses?