Audit Procedures for FCPA Testing


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Audit Procedures for FCPA Testing

  1. 1. Audit Procedures for FCPA Testing<br />Hernan Huwyler MBA CPA<br />
  2. 2. Summary<br />
  3. 3. Introduction<br />More detailsaboutthispresentation can beobtainedfrom my blog on<br />Governance, Risk Management and Compliance<br />
  4. 4. Presentation<br />FCPA compliance programs that require periodic testing of the anti-bribery controls are useful for revealing issues or areas of vulnerability. <br />Common audit procedures for FCPA testing.<br />
  5. 5. Presentation<br />High Level Controls<br />Review the existence of:<br />1. clearly articulated FCPA policies and procedures for company personnel, directors, and intermediaries,<br />2. proper FCPA policy communication to all levels of employees including translations for overseas employees,<br />3. mandatory training for FCPA awareness (especially to sales, legal, internal auditing, accounting, and management teams; when necessary also to agents, sub-agents and business partners),<br />4. a compliance hotline or other effective whistleblower process,<br />5. assignment of responsibility to one or more senior corporate executives with responsibility to monitor FCPA compliance,<br />6. appropriate disciplinary procedures to address violations, and<br />7. a facilitation payments account.<br />
  6. 6. Presentation<br />Commercial Cycle<br />Indentify and audit transactions with customers, suppliers and distributors which are public companies or involve an one-time payment.<br />Review discounts, rebates, refunds, promotional programs or other invoice “adjustments.”<br />Perform audits for key agents or distributors.<br />Analyze commission and finder’s fee payments.<br />Audit government contracts.<br />Review standard provisions in agreements, contracts, and renewals for compliance with the company’s policies and the requirements of the FCPA.<br />Evaluate favorable or abnormal credit terms or lower than fair market prices.<br />Indentify unusual duties taxes or involving excessive processing or shipping charges. <br />
  7. 7. Presentation<br />Service Contracting Cycle<br />Scrutinize payments made to consultants, sales representatives, agents, attorneys, lobbyists, marketers (red flag unspecified services and lack of deliveries). Ensure they are fulfilling a legitimate business need and there is a written rationale for their use. Check if their qualifications and resources allow performing the services billed.<br />Confirm that commissions and bonuses are in expected and reasonable ranges.<br />Audit accounts related to FCPA risks: gifts, hospitality, entertainment, travel, rebates, refunds, commissions, donations, professional fees, event expenses, credit card advances, logistics and shipping expenses, and so forth.<br />Query transactions with related keywords in different languages (eg. commission, fee, discount, charitable, bonus, pay to play, comps, expedite).<br />
  8. 8. Presentation<br />Treasury Cycle<br />Flag unusual payments or financial arrangements (eg, involving consultants, to offshore holding companies, to countries where the company does not operate).<br />Review cash payments and back transactions with rounded values.<br />Monitor charitable and political contributions.<br />Review employee expense reports and track high risk expenses (eg. entretaiment) for government employees. Check that expense reports or direct invoices are submitted to A/P.<br />
  9. 9. Presentation<br />Risk Mapping & FCPA<br />FCPA risk by country (history of corruption, Corruption Perceptions Index by Transparency International).<br />Nature of company products (higher risks in oil & gas, energy, infrastructure, communications, medical equipment and relating to regulated markets).<br />Known red flags<br />Joint ventures, partial ownership, and collaborative arrangements with governmental entities.<br />Sales channels involving contacting with government officials or requiring to use third Parties (before and after sales).<br />Transactions involving regulators.<br />Useful Reference for a FCPA Audit Program<br />