The “Focused Assessment” (FA) audit is the broadest type of audit conducted by CBP.
Why the increase in FA audits?
There are various reasons that could be behind the recent trend. CBP began its new fiscal year (FY) on October 1. It appears some audit offices started the planning phase for the FY 2014 audit plan earlier than normal.
Preparing for FA audit
With an FA audit, the initial contact is made by CBP approximately 60 days prior to the initiation of the audit—thus, not allowing much time for a company to react or to complete its own internal assessment as to how well prepared the company is for the audit.
Being fully prepared involves on-going risk assessment, long-term planning, and implementation of appropriate company-specific policies and procedures.
What are the chances of being selected for a CBP audit? CBP only has resources to audit a certain number of importers each year, and certain audit offices specialize in certain areas. Given these facts and other variables, there is no exact formula to determine who will be selected next for an FA audit. Yet, the cost of a wait-and-see approach can be very high.
FA audit timeline
The time involved in an audit can be quite extensive. The overall timeline for the FA audit can range from eight months to one year (12 months) from the initial contact.
The audit phases include:
- Advance conference
- Internal control questionnaire
- Entrance conference
- Exit conference
During these phases, CBP conducts interviews, requests documents and information, discusses results, provides a draft audit report, and ultimately issues a final audit report.
For companies subject to an audit, there will be a great demand on their resources required to complete the questionnaire, prepare for interviews of personnel from various departments, review example documents and information, and select sample transactions for a detailed review.
If the importer is related to the foreign suppliers or using any special trade programs, the amount of documentation requested can be more extensive.
The FA process allows for companies to review the documents and information before submitting to CBP—thus, providing an opportunity for identifying any errors prior to submitting the documents to CBP and for filing a prior disclosure when applicable. Still, this review will consume more resources and time.
Because companies and audit circumstances vary, as will the resources needed to respond and react to an audit, companies not currently aware of an audit need to be continually assessing their readiness and taking the necessary actions to be prepared for a potential audit. Discussions with a KPMG Trade & Customs professional about how best to prepare for a CBP audit can help identify any specific situation as well as options for on-going audits and/or proactive steps so as to be prepared when CBP calls.
For more information, contact a professional with KPMG’s Trade & Customs practice:
John L. McLoughlin
Todd R. Smith
Luis A. Abad
Or your local KPMG Trade & Customs professional.