7 signs that it’s time to re-evaluate your statutory audit approach
INSIGHT ARTICLE |
Taking advantage of global opportunity often means expanding into numerous foreign jurisdictions. International expansion offers tremendous strategic advantages, while opening risks in dealing with statutory audit requirements and other compliance burdens in every jurisdiction. Too often, companies view compliance as a negligible nuisance, leaving management of statutory audits to their foreign operations – that can be a costly mistake. Failure to comply timely or thoughtfully with these obligations can mean:
- Fines and penalties which, depending on the jurisdiction, can be substantial
- Loss of your license to do business in a jurisdiction
- Personal liability for your executives and directors, including the possibility of arrest
Effectively meeting your statutory audit obligations is a vital part of managing your global risk and maintaining solid corporate governance and citizenship. What’s more, a solid statutory audit process can provide a foundation upon which to manage international tax planning and compliance - including transfer pricing - that supports global strategic planning efforts through heightened visibility and confidence into company finances.
At a minimum, an efficiently managed global statutory audit program minimizes the overall work and expense of compliance efforts, shortening audit delivery times and freeing up critical resources for other valuable global efforts.
Have you seen any of the following at your company?
If so, it may be time to reconsider your statutory audit processes.
In RSM’s experience, the following seven indicators are signs that you need a statutory audit process overhaul:
- You have critical foreign mass, meaning six or more foreign locations, though this number can be lower depending on complexity of activities, corporate structure, maturity of internal controls and other issues
- You do not currently have an annual process to analyze and document foreign audit requirements in each country from a centralized location
- You do not currently gather, analyze, or house completed foreign audit reports centrally, nor make that information accessible to those who need it
- You have multiple overseas subsidiaries held under foreign holding companies that require a foreign consolidated audit
- You have recent overseas mergers and acquisitions or restructuring activities
- You have experienced substantial deviations of global audit fees from agreed-upon fees, indicating efficiencies may be possible
- You have foreign locations that are audited twice – once for the global audit ,then again for the statutory audit
Answered yes to one or more of these statements? Consider these five steps to managing your global statutory audit challenge