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Conducting compliance audits- how does your organisation measure up?

You’ve just learned that on a recent business trip to Singapore, one of your engineers decided to take some components from the warehouse to use as visual aids in the presentation she was giving. The components are controlled under the DSGL and your company has clear procedures concerning the process for obtaining export permits and internal shipment authorisations for these parts. You question the engineer about it and she tells you she ‘didn’t think it would be an issue’. You begin to realise that you’ve got a problem. How many times has this happened before?, you ask yourself. To find out, you will have to conduct an internal audit.

Conducting a periodic internal audit of import and export transactions can help to identify and eliminate any weak points in your company’s compliance program. A periodic audit can help to strengthen the overall effectiveness of a compliance program and reduce the likelihood of committing a violation. It is especially important for companies trading controlled technologies to conduct periodic audits of their transactions.

The first step to an effective audit program is having a well-documented set of policies and procedures against which to audit. For companies trading in ITAR controlled technologies, a Technology Control Plan will also be imperative. Not only can an auditor use these documents to assess compliance, but they can also examine where the policies and procedures fall down because they are ineffective, out-dated, or extinct due to an operational work around.

If your company already has an internal audit program that examines your import and export transactions, evaluate the following:

  • Is a qualified trade compliance professional responsible for conducting the internal audit, or does the responsibility fall to a generalist?
  • Is there a schedule of the types of transactions that fall under the scope of the audit? Is there a timeline for when the audits should be conducted (every 3 months, 6 months, etc.)?
  • Is there a potential conflict of interest between the auditor and the division being audited?
  • Does your company have a standard audit module or self-assessment tool? Do the audits measure the effectiveness of existing policies and procedures?
  • Does the audit measure whether there is effective daily oversight of trade activities, including whether the appropriate licenses/permits and appropriate internal shipment authorisations were obtained prior to shipment?
  • Does the audit measure the effectiveness of recordkeeping practices?
  • Does the audit include staff interviews (HR, IT, Logistics, Legal, Marketing, Sales, etc.) to assess their understanding of trade related responsibilities? Does that audit measure whether training and awareness programs are effective?
  • Are audit results reported to management? Are actionable compliance improvement programs developed and implemented subsequent to the audit?
  • How is it documented and verified that audits have been conducted? Are records of past audits maintained and reviewed to measure or demonstrate continuous improvement?

Having an effective audit program can help to bring issues to the surface before they become compliance problems. They can also help to identify the root cause of instances of non-compliance, allowing you to address the specific problem and keep further violations from occurring.

Though self-audits can be efficient, bringing in an external auditor can help to identify issues that are not readily visible to company staff. A fresh, objective perspective can often help to refine a compliance program and aid in incorporating best practices that can lead to a reduction in costs and an increase in effectiveness.

Carefully evaluate your company’s internal audit program to determine if it is helping your company to identify issues and continually improve your compliance program. The ability to demonstrate the existence of policies and procedures, a history or internal audits and resulting corrective actions, and a drive for continuous compliance improvement can help to mitigate penalties in the event of a violation.

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