Say the word “audit” to some people, and they tend to get uneasy and nervous. For some, panic sets in and their fear of the results of an audit causes a debilitating effect on their business.
However, cast your fears and anxieties aside, for approaching an audit process from the proper perspective can strengthen your business and create a productive environment. Specifically, for those engaged in trade compliance associated with importing and exporting, a post entry audit program can significantly improve your operations. Such a program is one in which you audit your own importing and exporting transactions after the fact to ensure the accuracy of your program and then publish the results internally.
If your business is involved in international trade, here are five valuable reasons why you should maintain a post entry audit program:
1. It helps achieve favorable Customs and other government agency reviews. Importing and exporting is an activity that is closely scrutinized by government agencies. In particular, U.S. Customs and Border Protection (CBP) conducts regular reviews of importers through a process called a Focused Assessment Program. During these reviews, one of the components CBP will check is to determine if your compliance program contains a solid post entry audit program. If so, they will likely conclude that you are undertaking the appropriate due diligence of your business and have a more favorable view of your operations.
2. It enables disclosure of discrepancies. No importer or exporter will be 100% accurate with all of their import and export transactions 100% of the time. However, a post entry audit program will enable you to identify discrepancies and submit appropriate disclosures to the government that will reconcile any variances and maintain your accuracy as closely to 100% as possible. One of the hallmarks of CBP’s expectations is that businesses are to police their own actions and institute the proper remedies. Proactively disclosing any transaction discrepancies helps avoid CBP discovering them first and taking penalty action.
3. It fosters better internal controls. The mere act of auditing your transactions adds discipline and formality to improve internal controls over financial activity. This in turn reflects favorably on the ability of your international business to uphold the expected performance standards. Furthermore, improving the internal controls in one area of company tends to influence other areas to increase their standards as well.
4. It sets the stage for advancing to ISA. The Importer Self Assessment (ISA) program through CBP allows an importer to forgo the Focused Assessment Program by conducting their own reviews and assessments and periodically reporting the results to CBP. Many importers favor this approach because it avoids the on-site CBP reviews, but an importer must be validated by CBP before being admitting into the ISA program. Demonstrating that you have a quality post entry audit program in place is prime requisite of ISA.
5. It builds accountability and ownership. Any quality program that centers on auditing will reinforce the accountability and the ownership of the employees to ensure they are conducting their business accurately and ethically. A post entry audit program to review international transactions creates an environment where the employees and the company as a whole will value the importance of adhering to the rules and regulations of importing and exporting. Not only does it result in verifying the accuracy of your financial transactions, but it can create opportunities to implement beneficial changes in your operations to become more compliant.
While reviewing your international business through a post entry audit program may sound daunting to some, it truly is the cornerstone of an effective trade compliance department in a company. Executed properly, it will pay measurable dividends.
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