COMESA PCA MANUAL

Comesa Post Clearance Audit
COMESA POST CLEARANCE AUDIT MANUAL.
INTRODUCTION
1.1 BACKGROUND
Post-clearance audit is a process, which enables Customs Officers to:
 Assess a client’s overall compliance with customs administered legislation;

 Create compliance pictures of selected industry sectors;
 Conduct a full review of a client’s liabilities and entitlements; and
 Assess the integrity of the trade data received from importers, exporters and
related industries.
Customs post clearance audits allow Customs authorities to verify compliance

after the goods have been released into the commerce of the nation.
The use of Customs Post-Clearance Audits on a “periodic” basis by Customs

authorities has grown considerably in recent years due to two main driving
forces. They are:
 A greater emphasis on trade facilitation due to the dramatic increases in the

number and volume of importations necessitating a “periodic” rather than
“transactional” while maintaining Customs program integrity; and
 The number of inspection staff available to provide Customs services has not
risen in response to increased trade volumes.
Transactional reviews continue to form a part of overall verification strategy,

with corresponding physical cargo checks being performed, however, the focus
is shifting to periodic single and multi-program reviews.
Post – clearance Audits can be performed as “desk audit” process or on-site at

the client’s premises. On-site verifications will always include an examination of
books and records to review and confirm information necessary to verify
compliance. However, post clearance audits should not be confused with
internal organisational audits, or with criminal investigations of fraud or
contraventions of Customs and other related legislation. Where criminal
activities are discovered as a result of post clearance audit, the details should
immediately be relayed to criminal investigators for follow-up action.
Occasionally, criminal investigators may call for assistance from Customs audit
personnel based on their expertise of specific business ‘sectors’ to assist in
establishing proper valuation, classification, origin, and marking requirements.
Finally, audits should not be confused with the normal everyday review of
Customs declarations and cargo checks which Customs officers’ perform
everyday as part of their revenue protection mandate.
1
1.2 WHY CUSTOMS AUDIT?
 With the introduction of GATT valuation, emphasis is placed on fast

clearance of goods to avoid delays, which cause unnecessary extra costs
to importers and exporters.
 The dramatic increases in the number and volume of importations
necessitates “periodic” rather than “transactional” checks.
 The number of customs staff on the ground has not risen in response to
increased trade volumes. Hence the Post importation audit strategy.
1.3 Post Clearance audit therefore enables Customs officers to: -
 Assess a clients overall compliance with Customs administered

legislation.
 Create compliance picture of selected industry sectors.
 Conduct full review of a client’s liabilities and entitlements.
 Assess the integrity of the trade data received from importers, exporters
and related industries.
1.4 Advantages of customs audit to customs and our stakeholders.
 It ensures greater compliance with Customs laws, regulations and

Agreements.
 Protects revenues.
 Facilitates quick movement of goods
 Fast clearance to compliant importers, which leads to less inconvenience
and no additional costs to them.
 Ensures thorough and in-depth scrutiny of transactions since the
importer is obliged to provide all the required records. This results into
accurate assessments and tax recovery than when interventions are
made in the course of the clearance process.
 Enhances compliance. It encourages the non compliant to be compliant
so as to also enjoy the benefits of the compliant. Hence they follow suit.
Enhances the audit function of a Customs administration and reduce

congestion and inconvenience to tax payers. This can be achieved if there
is well coordination with other audit Sections of the Customs
administration.
1.5 Customs Risk Management.
1.5.1 Definition of Risk.

Risk in Customs Audit context, is defined as the degree of exposure to
the chances of non-compliance that would result in loss to trade,
revenue, industry, or the public.
Customs work involves 3 major roles: -
2
 Security
 Revenue collection
 Facilitation
New global innovations are emerging and so are more sophisticated business
enterprises. Global communication, E-commerce, bulk trade etc have all
contributed to increase in global business. The challenges facing Nations are
that we must encourage investment and trade through trade facilitation. In so
doing, we collect government revenue and still endeavour to keep the security of
our nation. This calls for the need to maximise facilitation while at the same
time being in control. To do this, Risk assessment, profiling, and targeting is the
answer.
2.0 Risk assessment, Profiling and Selectivity

Risk assessment helps in preparing for the worst and hoping for the best. In
Customs, we must always find out about the risky areas in our country. Is it
the goods, the people or the country of origin? Is it the methods used in
conveying goods, etc?
We use the SWOT analysis to get the risk areas. The purpose here is to find the
linkage in order to administer a control mechanism without forgetting that in
the process, we have to facilitate trade.
In Risk analysis, we use the 5Ws plus the one H in order to assess the extent of
the risk. (What, Who, When, Where, Why and How).
Risk assessment involves looking at risk areas, rating them and assessing the
likelihood and then planning the control mechanism.
The risk impact must be measured by balancing the likelihood with the
consequences. The more the uncertainty, the higher the risk.
3.0 Risk Assessment
Since a number of COMESA members are applying Asycuda system in

Customs processes, data capture, storage and retrieval is made easy for
quick risk assessment, profiling and targeting.
Risk Management therefore, is about identifying and being prepared for what
can happen. It is a pro-active concept that involves taking calculated action to
3
manage risk whereby one is not taken unaware by various unwanted exposures
and costs.
4.0 Legal Authorities
The laws of most nations require importers, clearing agents (brokers),

transporters and operators of Customs controlled warehouses etc, to
maintain books and records, as well as obtain and maintain security
(usually in the form of a bond) to ensure that all duties and taxes lawfully
payable are remitted and collected.
Customs legislation also provides Customs authorities to demand the

presentation of those books and records for examination. Indeed, failure to
do so within a reasonable time is normally a contravention of Customs law,
necessitating a search of premises, fines, penalties and in severe cases,
prosecution.
Since post clearance audits are not likely to be useful if their results are not
implemented, most nations allow Customs authorities to collect duties,
taxes and penalties on past importations found to be payable as a result of
the audit function. Occasionally these amounts are collected from pledges
or security given by the importer, however, in some cases customs
authorities must seek collection through the courts to complete payment of
the unpaid debt.
4.1 Generally Accepted Accounting Principles
Generally Accepted Accounting Principles (GAAP) refer to the recognized

consensus of substantial authoritative support within a country at a
particular time as to:
 Which economic resources and obligations should be recorded

 Which changes in assets and liabilities should be recorded;
 How the assets and liabilities and their changes should be measured;
 What information should be disclosed; and
 Which financial statements should be prepared?
The standards may be broad guidelines of general application as well as
detailed business practices and procedures. The GAAP is usually formulated
and approved by an independent board or commission not by government;
however, governments may require compliance with GAAP in certain cases.
Internationally, GAAP’s are very similar by nature, as international trade
could not be conducted without such agreement. The GAAP provide
standards and practices against which independent auditors can evaluate
the maintenance of books and records, be it for Customs or other related
taxes.
4.2 Recruitment and training.
In most countries, auditing is a profession, with a professional association,

which conducts examinations, confers credentials, and maintains professional
standards. Auditors who are tasked with the conduct of Customs audits must
4
have a working knowledge of Customs and related legislation, and the
environment in which Customs authorities operate.
5.1 POST IMPORTATION AUDIT STANDARDS
Post Importation audit standards ensure national consistency and quality are
specific to the Customs environment. They provide a context for the audit
processes described throughout this document. Customs officers are expected
to support and apply these standards to all aspects of their verification and
audit activities.
5.1.1 POST IMPORTATION AUDIT STANDARDS
a. Audits must conform to the General Annex of Kyoto Convention”

“Guidelines on Customs Control”.
b. Audits should be adequately planned, executed, supervised and

reviewed.
c. Audits should be conducted with due consideration to the company’s

business circumstances.
d. Audits should be conducted objectively.
e. Audits should be conducted to determine baseline compliance levels of

the company as a whole, for the complete range of trade programs that
Customs administers.
f. Program compliance should be determined by officers qualified to do so

according to the relevant legislation.
g. Sufficient and appropriate audit evidence must be obtained by

inspection, observation, enquiry, confirmation, computation and
analysis. This will give a reasonable basis on which to support the
findings, conclusions and recommendations of the report.
h. Audit activities should be completed and an interim report presented to

the client within a reasonable time of the start of the audit.
i. The audit report should:-
i. Indicate the scope of the audit

ii. Contain findings and recommendations with respect to the
client’s compliance levels with Customs law
iii. Contain clear, concise explanations of findings to enable the
client understand the nature and level of non-compliance in
order to take immediate steps to make corrections and
increase future compliance.
5.2 WORKING PAPERS

5
Working Papers are all the documents contained in a working paper file. They
serve as the connecting link between the various stages of the audit process,
planning the audit, recording evidence obtained and analysed throughout the
audit, and the interim and final report presented to the client. They also serve
as a record of results of the audit work performed and form the basis of the
officer’ conclusions and recommendations presented in the final audit report. In
essence, they tell the story of the audit activity in such away that any qualified
authority would reach the same conclusions as the auditor involved.
5.2.1 General
There are two types of working papers:
1. Created by an officer:
Includes correspondence, company tour notes and observations, records of

interviews, memos to file spreadsheets of sample results, summary working
papers (objectives, sources of information, methodology, findings, conclusions,
recommendations, error rate calculations).
2. Obtained by the officer
Copy of trial balance, flowcharts, organizational charts, purchase orders,

invoices, bills of lading, technical specifications, etc.
5.2.2 Purpose of Working Papers
Working papers serve the following vital functions within the post-clearance
audit process.
Assist the officer throughout the audit by:
 Documenting the objectives and approach to the audit (planning

memorandum);
 Providing an organized framework for the audit (planning memorandum);
 Simplifying and organizing audit material for writing the audit report
(summary working paper); and
 Recording the reasons for changes to the plan or scope of the audit as
defined in the planning memorandum (program working papers).
Document the systems and internal controls of the company including

flowcharts or descriptions of the systems, their links, the customs activities,
descriptions of the records, typical reports, and unique features.
Provide a link between planned audit programs (objectives and procedures) to

the procedures actually conducted by justifying and explaining modifications to
the original plan.
Support the audit report and findings by providing the data necessary for the
preparation of the report, including:
 A description of the procedures followed (audit program)
6
 A description of the records examined (spread sheet , summary working
paper)
 A description of evidence obtained (memorandum to file, summary
working paper, spread sheet) and
 Evidence that work performed by the audit team was reviewed by the
team leader or supervisor.
Provide a basis for supervision and review by:

 Reducing the chances of omissions or incorrect procedures.
 Facilitating input from management by highlighting areas which may
defer from the original plan, and
 Facilitating the final review and approved process.
5.2.3 Characteristic of Good Working Papers
The characteristics of good working papers are organization, completeness,

clarity and conciseness, ease of preparation, ease of review, and integration.
Organization
The individual customs authority generally establishes standard methods of

filing, indexing and cross- referencing. The use of a standard index helps to
ensure that the file is complete. A standard indexing and referencing and
referencing system helps the reader of a file locate supporting material quickly.
A standard system allows staff from any place within the organization, at any
location understand and utilize the systems no matter where they are assigned.
Completeness
Working papers should always record the analysis of the evidence that led to
the audit conclusion, including:
The audit objective;

The audit procedures perform to collect sufficient, appropriate verification
evidence to allow the officer to make a conclusion on the audit objective;
An analysis supported by the evidence to determine if audit objective was met;
and the conclusions supported by the analysis to state whether or not the audit
objective was met
Clarity and Completeness
Working papers should be devoid of trial non-essential information and

irrelevant opinions. Clarity in the preparation of schedules requires experience,
care and planning.
Ease of Preparation
Working papers should be designed in a way that makes them easy to prepare.
A cumbersome schedule wastes not only the repairer’s time but also the time of
ant other user.
7
Ease of Review
Ease of review requires not only good organization, it also requires:
 Logical summation of results;

 Highlighting of important findings
 A method of revealing omissions, such as a procedure in an audit
program not being completed.
Integration
Working papers are more valuable on the job and during the review if there help
to:
 Tie the procedure performed to underlying objectives
 Integrate the planning and documentation of substantive procedures
with the results of the internal control evaluation and compliance
procedures; and
 Integrate other related parts of the verification
5.2.4 Preparation of Working Papers
COMPONENTS SPECIFICS
Identification Client name and file number
Period of verification
Name of officer who prepared the working paper – top right hand corner
Date working paper was prepared
Initials of the reviewer/supervisor
Page number (as per index)
Computer file number
Purpose, source, methodology, findings, conclusions, and recommendations
and error rates.
Schedules and analyses prepared by importer, including
 Document name
 Prepared by client
 Name of client representative who provided document (broker)
 Date document was received
 Source of document (manual or report document is taken from)
Check Marks and other Discrete, neat and legible marks should be used on working papers
notations No marks or notations should be made on client’s books and records or any
other original document
Marks should be described in a legend at the bottom of each working paper
or, where standard marking is used throughout the file, a legend at the
beginning will suffice
Indexing  Indexing leaves a clear audit trail for the officer and reviewer
 Standard indexing systems should be used for all audit files
 Each working paper should be indexed using a colour code system and
alpha/numeric coding system to:
1. Provide consistency, since the same capital letter stands for the
same section in all files.
2. Using a letter and number for each caption avoids the necessity of
double lettering and provides continuity with a section
3. working paper are all files in a logical sequence generally following
the audit program; and
8
4. Any subject matter in a set of in a set of working papers can be
located easily
Cross referencing If information is carried from one working number to another, it should be
cross-referenced on the applicable working papers by including the index
number next to the applicable information.
 If the information is from another working paper, the cross reference
number should be flagged to the left of the applicable information – use
red ink
 If the information goes to another working paper, cross-reference should
be flagged to the right of the applicable information – use red ink.
File Structure Follow the standard index, wherever possible
Each section of the file should have an index identifying working papers
contained in that section
Each customs Program main section provides a brief summation of the
important findings/results, which will:
Outline the steps taken during the audit
Note where the audit deviated from the planning memorandum
and/or audit program and briefly describe the reasoning behind the
conclusion
5.2.5 Confidentiality of information
All working papers, created or obtained by an officer are the property of the
Uganda Revenue Authority. This applies whether an officer or a company
official prepared or provided the papers. Audit staff must not disclose any such
information contained in the working papers and must not disclose any such
information to other parties, including other departments, agencies or
businesses.
Access to paper files should be closely controlled to ensure document security

when performing an on-site audit. Care should be exercised in handling and
safeguarding working papers at all times including data contained on diskettes
or computers ( password protect/encryption) Upon completion of the audit, any
importer documents no longer required should be returned, and any diskettes
containing stored data should be re- formatted to erase all non- essential data.
6.0 CLIENT ASSISTANCE IN POST CLEARANCE ACTIVITIES
6.1 INTRODUCTION
Customs Procedures rely, to a certain extent, on voluntary compliance. For it

to work, importers and other clients must be shown that compliance, in and of
itself, is just good business. Companies must take responsibility for the
accuracy and completeness of their customs declarations by developing these
habits internally, or through the services of a customs broker (clearance agent).
Client Assistance helps a client to comply, and promotes the benefits of a good
compliance record. Client Assistance will be accomplished by providing timely
information to businesses.
Audit members will
9
 Emphasize the importance of compliance
 Emphasize the importance of accurate information in the development of
trade statistics
 Ensure that any information provided to a client is correct, properly
researched and documented , reliable and based on full internal
consultation, to ensure that clients do not find themselves in non-
compliance due to information provided by the revenue Authority.
6.1.2 Assisting the Client
Client assistance is provided throughout the audit process. In particular, it is

provided in the following ways
Planning
 Involve high-level management of the company under review

 Conduct an orientation meeting if necessary
 Provide timely and carefully written correspondence explaining the scope
of audit, and the period under review, the number of on- site personnel
assigned to the audit, and the approximate time it will take to complete
on-site work activities, all before the beginning of the audit.
On- site
 Carefully plan the opening interview, including who will attend , and
provide an agenda.
 Conduct the opening interview, and introduce the officer responsible for
client service, if attending, as well as the audit team.
 Review audit team and client expectations, planning research, and the
Audit information sheet.
 Ensure the client’s business circumstances are understood.
 Keep the client informed of the findings throughout the process.
Reporting
 Ensure decisions are well researched, including consultation with

officers from specific program areas
 Make constructive comments and recommendations that concentrate on
the kinds of errors the company made and what factors caused it.
 Address the report to the senior manger of the company and specify a
response date.
 Encourage the company to respond to the issues.
 Advise the company of the appeal/redress processes available
Follow up
 Identify to the client the appropriate client service representative, where

appropriate
 Emphasize the benefits of the client having one contract for all customs
issues related to the audit and the importance of communication
 Provide the client service representative with a copy of the final audit report,
which includes the client’s comments.
10
DEVELOPING THE AUDIT PLAN
7.1 INTRODUCTION.
Customs Authorities maintain a complete list of all importers for planning

purposes. The record include such basic information as the company charter,
offices, business address, past audit record, criminal investigations files and
any other intelligence or other information that would be relevant to assigning a
“risk” factor to the importer, the goods being imported, and to the company’s
overall compliance with basic accounting standards,
From these records, Customs audit managers can identify priorities in
preparing an audit plan including an annual or periodic schedule of audits to
be conducted for a given fiscal year. The audit may be updated as the need
arises, and indicates the audit objectives and scope of the audits to be
conducted to satisfy the verification aspects of informed voluntary compliance.
Prior to initiating the audit, the auditor interviews other customs officers, such
as Investigators, who may have relevant and recent information about an
importer selected for audit. The auditor also sends a formal letter to the
importer announcing the planned audit, the timing, the objectives and scope of
the audit. Professionalism, communication and co-ordination are key elements
of the audit process.
7.2 PRIOR TO THE AUDIT
Planning is an essential part of the audit as it sets the foundation for the entire
process. Developing a well though out plan will help the audit team through
the audit process in an orderly and timely manner. A Planning Memorandum
will document the steps and considerations the team has taken. It is important
to note that the planning process will continue throughout the entire audit.
The planning memorandum will be subject to modifications until the systems
descriptions completed. Significant changes that could have an impact on the
verification (e.g records held at a different location) would be added to the
planning memo and approved by the manager.
This module describes the essential elements that must be considered at the
planning stage of the process.
7.3 PLANING CONSIDERATIONS
The concepts presented in this module should be given consideration

throughout the planning process. They will greatly assist officers in achieving
the planning objectives.
1. Existence of internal control systems of a company
The internal controls of the company will have a dramatic impact on the
planned audit procedures. For example, the audit procedure used will depend
on the strength of the internal controls. The audit procedures must be
documented so that they can be linked to the scope and the components.
2. Concerns
11
An audit concern is information or issues that need clarification, or special
attention, or affect the audit procedures. Audit concerns are usually identified
at the planning stage when documentation received from the client or other
government departments is reviewed and information analysed.
All concerns should be noted on a working paper to ensure that they are
addressed when the audit team goes on-site. Some of the issues will be
resolved after clarification with company officials or when additional
documentation is received and reviewed. Those issues should then be identified
on the working paper as having been resolved.
After the systems description, the notes in the concerns working paper should
be reviewed. At that point any concerns that have not been resolved should be
dealt with by modifying the procedures or further documenting the issues.
3. Materiality
The concept of materiality refers to relative importance of the accuracy of

information and the effect that misstatement information would have on a
reader’s perception of the information. This means that some misstatements
could be ignored, given their impact on the final results.
In the post clearance audit environment, where a representative sample is used

for the program audit stage, this concept of materiality irrelevant because of
each customs program, the value of all errors in included in the error rate
calculation. The recommendation to the importer or other client and follow-up
action you take as part of the audit team will, however, take into account the
reasons why an error occurred. The audit team will not have to decide whether
or not to include an error in the results. It will have to be included every time
regardless of its relative importance.
Materiality is also used to make decisions on supplementary sampling. For

example, if a given customs program (Drawbacks) is not adequately represented
in a sample, materiality will be used to determine whether or not to select
additional samples, on the number of transactions that appear in the
population for a program.
8.1 AUDIT PLANNING MEMORANDUM
The audit-planning memorandum is an internal document that is an essential

working tool for the audit team, audit coordinators and managers. It is
prepared by the audit team members and approved by management. All
information carried forward to the planning memorandum must be cross-
referenced to the working paper from which the information was obtained or
analysed.
COMPONENT CONTENTS
Title page  Name of document
12
Name of company
Date approved and by who
Table of Contents Sections
Appendices
Reason for selection An explanation of why the company was chosen for audit
Introduction Name and Address of company
Contacts (name/ address/responsibility)
Business numbers
Company profile and Information on importations, description of organization (chart
analysis* or narrative)
Audit objectives  Overall objectives
Audit Scope  Audit period
 Selection and locations of on-site visits
 Customs program
 Company’s systems
 Planning considerations
Sample selection plan Population base
Purification of population
Basis for sample selection
Audit Team members and Name of each team member and areas of responsibilities.
assigned responsibilities
Milestones Timetable
 On-site dates
 Overall projected timing for file completion
 Reporting dates
APPENDICES
Appendix “A” - Opening Interview Agenda  Opening interview agenda and questions prepared in
advance
Appendix “B” – Audit Programs  Objectives
 Considerations
 Procedures
 When completing the company profile component, the nature of the

company’s business must be taken into consideration.
Factors to consider.
 The number of divisions and locations and import activity of the

company being audited
 The skills and experience of audit team members
 The requirement to involve other Customs personnel in the audit (e.g
Draw backs specialist)
8.2 ANALYTICAL REVIEW
13
In preparation for undertaking an audit, and throughout the audit process, it is
useful to engage in an analytical review of the company. This could include a
review of the company’s financial statements, and notes to the financial
statements. This information is public record. Through this review, Customs
audit members can determine a company’s importing trends, compare the
company under review to other companies in the same industry sector, and
identify potential concerns.
Elements of an analytical review include:
 Identification of accounts that have an impact on the information the team

is trying to assess (purchase of domestic goods could have an impact on
importation).
 Relationships between accounts identified and the information being

assessed (the higher the amount of domestic purchases, the lower the amount
of importations).
 Prediction of outcome of the information given the existing relationship.

(predict the amount of importations by analysing the domestic purchases).
 Comparison and evaluation of the current information with the results

obtained by the exercise (compare the amount of importations calculated with
the amount of importations declared and draw a conclusion).
8.3 TIMING AND OBJECTIVES OF ANALYTICAL REVIEW.
The detailed elements of analytical review should be considered with the timing
of their use. If analytical review procedures are not applied until the end of the
audit, the benefit of such procedures are diminished. For example, if tests of
details (audit of Customs programs) have already been performed on the year’s
operations before the analytical review, unusual fluctuations isolated by the
analytical review which require further testing may indicate re-testing the
population details. The sooner the analytical review is commenced, the earlier
an audit the audit team may isolate errors and omissions, changes in
accounting practices, or unusual trends that tests of detail may not reveal.
8.4 DOCUMENTATION OF ANALYTICAL REVIEW
The Customs audit team should document the rationale underlying procedures
followed and decisions made, including:
 Accounting amounts and the relationships subjected to analytical review

 Accounts selected and the type of relationship that was looked at
 Objectives of the procedures applied, for example, response to an audit
concern
 Criteria used to determine significance of a fluctuation
 Past relationship between accounts or the importance of discrepancies
between the current amounts and the previous year’s and
 Significant fluctuations noted together with details of how they were
investigated and the results of the investigations.
14
STATE YOUR CONCLUSION!!
9.0 CONTACT WITH IMPORTER FOR ON-SITE AUDIT
Once a company has been selected for a post-clearance audit, company officials
must be notified to arrange for an on-site visit.
9.1 NOTIFICATION
The initial contact with the company is by telephone to inform officials of their
selection for post-clearance audit. It is important that a senior-level official be
contacted. This may assist in ensuring full that cooperation is provided to the
audit team and that the team will have direct access to all relevant records and
documents. A standard notification letter is then sent to this contact and copied
to the individual responsible to Customs related matters for the company. The
letter should be sent immediately after the telephone conversation. The letter
will indicate the date the post-clearance audit will commence which normally
should be at least 90 days after the date of the notification letter. (Days may
vary from country to country). The on site work can commence before the
ninetieth day if the client agrees.
After the notification letter has been sent, the officer will:
 Determine whether an orientation presentation is needed or requested.

 Discuss documentation available and location of records.
 Confirm audit period under review; and
 Establish an on-site audit time frame.
9.2 LETTER TO THE COMPANY.
As a follow-up to the initial communication with the company, a detailed,

formal letter should be sent to the company officials. The letter advises the
company of the agreed to audit arrangements and confirms:
 Starting date
 Scope of the audit
 Names of the audit team members
 Legislative basis for the audit (Customs Management Act)
 Audit may result in additional duties owing; and
 Information obtained during the audit will be treated as confidential
In addition, information required before the actual audit will be requested,

including:
 Copy of the company’s organization chart;

 Copy of the company’s trial balance in electronic or other acceptable format
for the audit period;
 Chart of accounts;
 Flowcharts of the applicable accounting systems;
 Type of computer capacity, accessibility, and the provision of tapes/link
ups; and
 Accounting manuals/policies as they relate to customs activities.
15
The above list is not all-inclusive and should be tailored depending on the
company and the goods subject to audit. In some cases this information may
be requested in the notification letter.
7.3 ORIENTATION PRESENTATION
During the initial planning stage, the audit team has commenced an analysis of
the importer’s activities and has decided to proceed with the audit. At this time,
the team members may decide to provide an orientation presentation,
particularly if this importer is being audited for the first time. The focus will be
on providing general information and answering the client’s concerns and
questions, prior to the actual commencement of the on-site visit
9.4 OBJECTIVES OF THE OPENING INTERVIEW
The first day of the on-site audit will always begin with an opening interview.
This is a critical phase in the audit process. The discussion the beginning of the
on-site work and it will set the tone for future discussions. The flexibility and
immediacy of the face to face interview make the introductory meeting a very
important communication tool. Although information obtained cannot be
considered factual until verified, a well-conducted meeting will provide the
information needed to begin the audit and open up areas of examination.
The objectives of the meeting are to:-
1. ESTALISH A WORKING RELATIONSHIP
 Meet with company contacts for each phase of the audit;

 Confirm the scope of the audit as previously provided in the letter to the
company;
 Introduce members of the audit team;
 Determine the level of involvement of senior company wants in the audit
process;
 Emphasize to the importer the importance of timely responses to request for
information; and
 Discuss how the client service function will result in a more efficient and
timely audit process.
2. CONFIRM AND UPDATE AUDIT INFORMATION
 Discuss any concerns or issues that have been found within the industry.
 Confirm that the audit time frames are realistic, i.e will all the required
company personnel and documents be made available to the audit team, as
requested;
 Conform pre-audit research e.g office locations, goods imported;
 Confirm date and time of facility tour, if not immediately after opening
interview.
3. BEGIN THE CLIENT ASSISTANCE PROCESS
16
 Listen and respond to company’s concerns
 Explain the reassessment policy and redress/appeal mechanisms.
9.5 PREPARING FOR THE OPENING INTERVIEW
The following steps should be taken before the opening interview:
1. Determine opening interview details.
All team members should attend the meeting. Confirm with the client who will
be attending the meeting on the company’s behalf. Include details in the Letter
to the company (7.2)
2. Review audit research and audit planning memorandum.
3. Prepare an agenda
The opening interview sets the tone for the on-site audit. Details of the audit
activities to be done will be discussed and scheduled during the meeting. It is
essential that a carefully prepared agenda is distributed to all participants
before the meeting.
The typical agenda will include the following:
Introduction of audit team members  Audit period

 Customs programs used by importer
 Books and records that will be
examined
The scope of the audit  Interviews with key company
personnel
 Facility tour
 Systems description w2alk-through
Confirm timing of various portions  General
of the on-site visit  Program specific
Audit objectives
Review outstanding issues and
concerns identified during initial
planning stage
Confidentiality
Explanation of reassessment policy
Administrative issues
Questions
Additional information  Authority memorandum
 Customs notices
 Information brochures and any other
relevant document
9.6 CONFIDENTIALITY
17
In general, officers must be fully aware of the importance of not disclosing any
client information to anyone not entitled to such information, including other
ministries, departments, agencies, or companies. Officers must also ensure that
confidential information is protected at all times while on the importer’s
premises. This includes various paper files and documents carried by an audit
team member, as well as any files created in electronic format. Team members
should never bring information concerning one importer to the offices of
another importer, in any format.
9.7 CONDUCTING THE OPENING INTERVIEW.
1.Establish an open and friendly atmosphere

2.Introductions should include exchange of business cards.
3.Take notes of the discussion.
9.8 FOLLOWING THE MEETING.
Prepare a working paper covering all aspects of the meeting. This should be
prepared immediately after the meeting to ensure all issues are identified.
A copy of the minutes from the opening interview and updates should be
provided to the client.
Follow up on anything that was agreed to at the meeting, for example, provide
further information, request further information, research an issue further,
change timetables, etc
Review and update, as appropriate, the approved audit memorandum.

Begin the on-site audit work by participating in a facility tour.
10.0 ACTIVITIES FOR AN ON-SITE AUDIT
After the opening interview, the team will begin the on-site audit activities.
There are four main on-site audit activities.
1. The systems description
2. The sample selection
3. The program compliance audit
4. The evaluation of audit findings
10.1 SYSTEMS DESCRIPTION
The systems description will assist officers in determining the population from
which sample transactions will be selected. A representative sample of
individual items will be selected from the company’s books and records using a
statistical methodology. As each customs program is verified, errors for each
will be identified. The value for duty associated with those errors will be used to
calculate the error rate for each program.
There are two main purposes for undertaking a systems description:
1. To document, for the period under review, the company’s import – related
activities. For example.
18
 Where the books and records are maintained and in what format;
 What type of documents are prepared for each activity (purchasing,
receiving);
 What information is recorded on these documents.
This will allow the team member to determine if an audit trail exists and what
documents should be examined to obtain the audit evidence.
2. To determine which of the company’s systems contains the complete

population of all imported goods.
More than one system may have to be joined together to ensure the resulting
population contains a record of all imported goods including overages and
shortages, domestic exported goods returned, no-charge, etc. This population
will be used to select a sample of transactions for compliance measurement.
There are three steps involved in the description of the company’s systems:
1. Evaluation of the company’s business operations.

2. Documentation of internal controls.
3. Walk through of sample transactions.
10.1.1 DOCUMENTATION OF COMPANY OPERATIONS.
The first step is to determine how a company’s business operates. This is done
through a review of:
 Organisational charts
 Procedures manuals
 Discussions with company personnel
 Narratives
 Flow charts
 Systems description questionnaire – completed by company officials.
The officer must ensure that the systems being documented are the same ones
that were in place during the audit period. The officer must gain an
understanding of the company’s systems and the flow of transactions in each of
the systems relevant to accurate reporting of importing activities to customs.
To gain an understanding of the company’s systems, the officer should
interview key company personnel, such as purchasing staff, receiving and other
accounting departments and customs departments, to review and discuss
formal procedures that are outlined in the company’s procedures manuals.
Many companies will have procedures manuals available. These manuals
should be reviewed by the officer and then discussed to determine if in fact the
procedures are being followed as written.
The officer should then prepare a narrative or flowchart of the company’s

systems, using narratives when the systems are easily described and flowcharts
where systems are complex. The flow chart or narrative should trace the
relevant documents from their origin and recording in the system to their
processing and final disposition. A well-prepared flow chart provides all team
members with a clear understanding of how the systems work and interact. All
19
narratives and flow charts should be submitted to the company officials for
comment. The company may have external auditors who have already prepared
narratives and/or flow chart. In that case, the officers should review the
documents with the appropriate personnel to ensure that the systems were
working as identified during the period under review.
10.1.2 Documentation of internal controls
In the second step, internal controls are the policies and procedures established
and maintained by management to ensure the orderly conduct of the company’s
business in safeguarding assets and in complying with the law. Each system, to
be effective, must be well designed and properly operated. Without a good
control system, the risk of material misstatement can be significantly affected.
Implementation of well – designed systems may prevent or detect misstatements
that might otherwise occur.
10.1.3 Walk-through of sample transactions
The third step is to undertake a walk-through test by following an example of a

document from its origin to its final disposition for each of the company’s
systems under review. This provides the officer with a better understanding of
the company’s systems and ensures that the systems operate as documented in
the procedures manuals and as stated by company personnel.
Once the systems have been documented through the use of a narrative, flow
chart, and questionnaires, it is essential that sample transactions be followed
through from their origin to their final disposition for each of the systems under
review.
Benefits of the walk-through test:
 Confirms that the systems operate as documented. If the systems are not
operating as documented determine the reason for the discrepancy.
 Identifies the source documents and data files that are available.
 Determines if an audit trail exists.
 Provides an opportunity for a preliminary assessment of the systems links

that exist.
10.2 SAMPLE SELECTION
20
The systems description will assist the audit team in choosing which of the
company’s books and records to sample. Those books and records must have
the following qualities.
 They must be relevant for use in determining compliance to the various

Customs programs under review.
 They must be complete in that they capture all of the transactions related
to the importations.
 They must have integrity and reliability in that controls exist to ensure
their completeness and that adjustments are captured.
 They must be verifiable in that they can be directly linked to Customs

Reporting and Accounting.
10.2.1 Objective of Sampling
The general objective of sampling is to select individual items from a population

on a statistical basis, then examine and evaluate the selected items and project
the results in a logical manner. This provides appropriate assurance of
assurance of reaching the same conclusion as would have been obtained by
examining and evaluating all items in the population. Although sampling
introduces a level of additional risk into the audit process (i.e that the
conclusion derived from the sample differs from the conclusion that would have
been obtained from 100% review), it is required if audits are to be completed on
a timely and economical basis.
10.2.2 Sampling Plans
Using the information gathered, there are several different plans available. The
following are recommended.
SAMPLING TYPE DESCRIPTION

Attributes sampling plan Used when the test objective is to answer how may of how often?
Yes/no type to test (i.e either the classification is right or wrong, the
value is right or wrong)
Variables sampling plan Used when the test objective is to answer the question how much is
in the population?
Statistics obtained from the sampling test provide an average
amount (money, weight, length) that can be projected on the
population (i.e, what is the value of the errors?)
10.2.3 Developing the Sampling Plan
Once the sampling type (attributes vs variables) has been determined and the
books and records from which the sampling population will be taken, the
sampling population must be purified in order to isolate the transaction that
relate to the imported goods under review.This will facilitate the sampling
process by assuring that a transaction that should not be part of the sample
(domestic goods or non-dutiable service) is not included once the sampling is
under way. There are different ways this can be achieved, one of which is
21
through audit software. Certain variables can be isolated such as currency of
settlement, shipping location and postcode. This resultsin a file with the goods
population being produced.
10.2.4 DETERMINING THE SAMPLING SIZE
Certain parameters need to be estimated or established in order to calculate the

required sampling size, regardless of whether the variables or attributes
sampling methodology is to be used. They are:
Confidence level  Confidence level is the degree to which the sample drawn
represents the true nature of the population. For
example, when a confidence level of 95% is used, then
there are 95 changes in 100 that the sample results will
represent the total population.
 The higher the confidence level, the more statistically
accurate the results are.
 A confidence level of 95% is recommended
Precision  Precision is the range of percentage points within which
the true condition of the entire population should fall at the
specified confidence level. For example, if the expected
error rate is 10% the precision could be + or –5% and
15%. In other words, we are 95% confident that the actual
error rate of the population is between 5% and 15%.
 The cost of obtaining the information versus the
requirement for the precision must be considered – the
narrower the precision, the greater the cost.
Expected error rate  The expected error rate is the error rate that you expect to
see in the population you are sampling. To assist you in
estimating the expected error rate, a pre-test sample
should be drawn from the sampling population.
The pre-test sample consists of 25 transactions that are selected within the
purified population of imported goods. The pre-test is not only done to
establish the expected error rate. It is also used to:
 Provide an opportunity to gain better knowledge of the population;

 Prevent over-sampling and unnecessary work by providing more realistic
error rates; and
 Help identify risk areas.
Note that the pre-test will not result in additional work being performed, as
these transaction will be included in the general sample.
The only two customs programs that are generally selected for the pre-test are
the Valuation Program and the Classification Program. This will result in two
different error rates. Judgement and team member discussion will be used to
determine the error rate that will be used to calculate the sample size (normally
the highest rate). This will lead to over- sampling of one of the programs,
however it is preferred over under-sampling or weighted sampling when revenue
implications are considered as part of the audit.
10.2.5 Sample Selection
22
After determining the sampling size, the audit team must select a sample that
will be representative of the population from which it was drawn.
A representative sample can be obtained by:
 Giving each item in the population an equal chance of being selected,

avoiding any systematic bias, and
 Choosing a sample size large enough to reduce any significant departures
from the norm.
Since errors are likely to be spread uniformly throughout the test population,
random sampling is normally used. Such samples may be either value
oriented or attribute oriented. The technique used will depend on the nature
of the population, the types or errors that are anticipated, and the coverage
level required. Officers should be careful to ensure that no bias is introduced
into the selection process (i.e selecting “easy to find” items or testing the first
and last items on each page).
SAMPLING TECHNIQUES AVAILABLE
Systematic (interval)  Samples with uniform intervals between each one are selected
sampling  For example, every 20th invoice
 If using this technique, ensure that there is not an existing repetitive
pattern or arrangement of the population that could bias the results
Stratified sampling  Involves randomly sampling items from two or more strata/segments of
the total population
 Each stratum is sampled independently
 Results can be interpreted separately for each stratum or combined for
the entire population
Monetary unit sampling  Similar to interval sampling (#1) with the exception that in this case,
the interval is an amount of money. This will help to choose a single
dollar out of an invoice.
 This method is generally associated with Valuables samples
 Every currency unit of the population will have the same probability of
being selected. This will permit for the extrapolation of the error rates,
by value, to the whole population
10.2.6 Supplemental Sampling
The sampling results for each program under review must be analysed to
determine if the required level of assurance has been obtained for each
program. Supplemental sampling is used when the test sample does not reflect
the Customs population of entries. For example, if the importer does 20% of his
business by way of importing widgets, and only 1% of the test sample
represents widgets, additional transaction will be drawn from that specific
population to complete the test.
10.3.0 PROGRAM COMPLIANCE VERIFICATION

23
10.3.1 Detailed audit programs.
Once the sample has been selected, it will be examined for compliance with the
Customs program that applies. Audit programs are the primary tools used by
the officer during the program verification portion of the on-site activities. They
are made up of an objective and procedures that will be taken to meet the
objective.
The audit objective states the purpose of each verification program clearly and
concisely. The audit procedures provide a comprehensive plan for the officer to
assist in determining if the various Customs program objectives have been met
by listing each audit procedure to be performed during the audit. Each
procedure will include a description of the evidence to be gathered, the
technique that will be used to gather it, and the extent of the testing (for
example review of trial balance) for the selected sample.
10.3.2 Purpose of detailed audit program
The detailed audit programs serve as useful tools in scheduling and controlling
audit work. The purpose of detailed audit programs is to:
1. Clearly identify the objective for each of the audit programs.

2. List the audit procedures that will be utilized to ensure that Customs
program objectives have been met.
3. Promote national consistency for periodic audit activities.
4. Provide a comparison of what procedures were planned with what
procedures were actually performed.
5. Identify the officer(s) responsible for each audit procedure.
6. Identify procedures that have been planned but not completed.
7. Provide documentary evidence (primary working paper) of all of the
verification procedures that have been both planned and completed.
8. Assist in audit of companies in the same or similar industries
9. Assist future audits of the company currently under review.
10.3.3 Using the detailed audit programs
At certain points in the audit process, decisions will have to be made as to

whether or not further audit is necessary. Any significant changes to the audit
programs” procedures must be submitted to the manager for approval and
thoroughly documented in working papers.
Any changes should take the following into consideration:
 Concerns identified during the planning process which now appear less
significant and warrant no further examination;
 Concerns identified during the planning process which are significant, but
require no further audit to support audit findings or observations; and
 Issues of significance, whether identified or not in the planning process,
which require further examination.
Any procedure include at the planning stage should not be arbitrarily omitted.
The officer should determine if another procedure can replace it and provide an
24
explanation. As each procedure in the audit program is completed, the
assigned officer will:
 Initial the procedure as completed and cross-reference to the related

working papers; or
 Document why a procedure was not completed or how it was modified.
10.3.4 Audit techniques.
While conducting the post-clearance audit, the audit team will gather evidence
to support their findings, recommendations and conclusions. In addition,
sufficient evidence must be gathered to support any re assessments that may
result from the audit.
TYPES OF AUDIT TECHNIQUES
The following represent the six most common techniques that are used to
collect evidence during a post-clearance audit.
1. Physical Examination
Physical examination refers to the inspection or count of goods by the officer.

Therefore, to determine the correct tariff classification of a good, one of the
audit procedures would be to physically examine the goods on-site.
2. Scrutiny of accounting records
Scrutiny refers to the review of records to locate items, which may require
further investigation. Scrutiny may be performed by visually reviewing the trial
balance to identify items that should be included in the value for duty of goods
– for example, the identification of an account for assists or royalties.
3. Vouching
Vouching refers to the officer’s examination of related source documents.

Vouching involves the comparison of information on the source document to the
entry in the company’s books and records and the information accounted for to
Customs – for example, the comparison of the value for duty of goods reported
on a commercial invoice to the amount recorded in the company’s records and
the value accounted for to customs on an import entry. Vouching is the
verification technique that is used most often to obtain evidence during
verification. Examples of source documents would be vendor invoices, packing
slips, royalty agreements, and cancelled cheques.
4. Inquiries of the Company
Inquiry involves obtaining documents prepared by the company or oral

information from the client in response to questions from the officer. Evidence
obtained from the company through inquiry cannot usually be considered
conclusive unless the original source is a third party. In this situation, it is
necessary for the officer to obtain corroborating evidence through the use of
25
other methods such as a walk-through of the sample transactions to confirm
information obtained from procedure manuals.
5. Confirmation of third party transactions
Confirmation entails the receipt of a written response, requested by the officer

through the company, from an independent third party verifying the accuracy of
the information. This would include information from a supplier concerning
valuation of goods invoiced as no charge or free.
6. Computations
Computation involves the rechecking of the company’s arithmetical accuracy.

This would include the client’s calculation on assists, royalties, and tooling.
10.4 EVALUATION OF AUDIT FINDINGS
The evaluation of the audit results is important for the purposes of long-term
compliance. The objective is to determine the cause of errors if possible and to
make recommendations that will eliminate the errors in the future.
Recommendations should point the company in the right direction but not to be
too directive.
An error can be systemic, cyclical, human or random
 If there is a patter to the error, it is systemic

 If the error occurs at certain times of the year, it is cyclical
 High turnover in personnel is usually responsible for human error
 Errors with no specific reason are random, and it is therefore difficult to
make recommendations to prevent it.
A conclusion based on the findings and this type of analysis must be completed
for every Customs program audited. The conclusion is then used to make
proper recommendations for each program.
11.0 THE EXIT INTERVIEW
11.1 INTRODUCTION.
Although there should be frequent dialogue between audit team and the
company throughout the audit process, the audit findings should be formally
discussed with the appropriate company officials at the conclusion of the on-
site portion of the audit. This meeting is referred to as the Exit interview.
Whenever possible, it is conducted as the team is leaving the company’s
premises to return to the office to complete the verification. Keep in mind that
during the completion of the verification, the need for additional information
may be identified. It is therefore important that company officials be advised
that the team may have to return to the client’s premises before finalising the
post-clearance audit.
26
11.2 PURPOSE OF THE EXIT INTERVIEW
There are several purposes for the exit interview with the company. These
include:
1. To review the audit procedures followed;
2. To ensure that there is agreement between the team members and the
company on factual matters, even though there may be disagreement about
any conclusions that may have been reached.
3. To ensure that the company is aware of the audit findings and their
implications;
4. To finalize the on-site visit portion of the audit in a professional and

business-like manner; and
5. To establish time commitments with the company for providing outstanding

information previously requested. Advise the company officials that delays
in submitting the information will postpone completion of the audit.
9.3 PREPARING FOR THE EXIT INTERVIEW
The three steps, which should be performed in preparing for the exit interview,
are:
1. Prepare a schedule of audit findings.
2. Discuss audit findings with the audit team (members and leader).
3. Prepare and distribute an agenda to company officials in advance, to give

them time to prepare for the meeting and to ensure that the appropriate
personnel are available to attend.
11.4 PARTICIPANTS AND NOTES
The composition of the audit team members attending the exit interview
depends on the individual circumstances. The number of company officials
should be left to the company’s discretion. Notes should be taken during the
course of the exit interview detailing agreement or disagreement with the audit
findings and outlining points advanced by company officials to support their
position. Dates, times, and meeting participants’ names should be included.
11.5 CONDUCT OF THE EXIT INTERVIEW
It is important that the interview be conducted in a friendly atmosphere,

ensuring that all information and audits results are discussed and explain that
an interim report will be prepared for the company to comment on all
recommendations. The recommendations, along with the client’s comments, will
be noted in the final audit report.
27
12.0 COMPLETING THE AUDIT FILE
After all audit work has been completed, the file should be compiled and
organised by the audit team in preparation for drafting the interim report.
A file is prepared for each post-clearance audit. The file is an accumulation of
all working papers needed to support the findings, recommendations, and
conclusions of the audit, including confidential material.
12.1 CONTENTS OF THE FILE
Post- clearance audit files are compiled and maintained by the audit team and,
when completed, will contain:
A record of the plans made
 Audit planning memorandum and supporting documentation

 Audit programs
A record of the performance of the audit
 All procedures planned and executed

 Audit evidence obtained
 Working papers
 Evaluation schedules documenting the logical basis of audit conclusions
concerning matters such as internal controls, weaknesses, errors, and
sample results
 Summary working papers (objectives, source of information, methodology,
findings, conclusion, recommendations, error rate calculation
 Spreadsheets
The Audit Reports
 Interim and final audit report including all supporting schedules

 Review notes
12.2 REVIEW OF THE AUDIT FILES
When the audit work in the file has been substantially completed, the file
should be given to the officer(s) tasked with writing the report, who will be
responsible for:
 Reviewing all working papers to ensure completeness;
 Ensuring that all outstanding points and maters have been addressed by
the team member responsible for the section;
 Reviewing all notes prepared by a third party, such as suppliers to the

company;
 Finalizing the summary working papers; and
 Preparing the draft interim report that is fully indexed to all supporting
working papers.
28
The completed file and draft interim report should be forwarded to the manager
for review and approval.
13.0 THE AUDIT REPORT
13.1 GENERAL
The audit report is a record of the extent of verification performed, the results of
the audit, and other important matters identified during the course of the audit.
It is important to remember the main user of the audit report is the company.
Its purpose is to provide:
 A means of communication between officers, the company and other

authorized users;
 A basis of evaluation of the quality of work performed;
 A basis of quality control by the customs authority;
 Facts useful in pre-audit examination of the file by subsequent officers; and
 A source of management information.
Writing the report is one of the most important tasks for an officer because it
represents the culmination of the team’s efforts in carrying out verification. The
report is the final product of the audit process. Despite the time and effort
devoted to accumulating the facts that form the basis of the report, the only
evidence the reader may see is the report itself. The recipients rely on the report
for guidance and, from the manner in which it is composed; they form their
impression of the reliability of the audit.
To facilitate response from the client, the team will first produce an interim
audit report. This is provided to the company, whose responses are then
incorporated and a final report is issued.
13.1 CHARACTERISTICS OF A GOOD REPORT
The audit report is the final step in the audit process. The report is an essential
part of the audit process because it explains to the company or reader what the
audit team has done, what has been found, conclusions reached, and
recommendations made. It may be the only part of the audit that the company
officials see. It is therefore important that the audit report has the following
characteristics.
Accuracy  Each statement and reference must be based on documented
29
evidence contained in the audit files
 The interim report should be cross-referenced to the working
papers to allow a reader to easily locate supporting evidence
 The report is to be constructed in an objective and
informative manner
 Matters should be reported in their proper perspective by
explaining the relevant circumstances, in additions to the
presentation of findings.
Conciseness  The report should only contain relevant and significant
information
 Sufficient information aided by references to supporting
schedules must be given to enable the reader to understand
the issues.
Timeliness  The work should be planned with the objective of reporting
results as quickly as possible.
13.2 PARTS OF THE AUDIT REPORT AND COVERING LETTER
13.2.1 Covering letter
Included in the package to the company should be a letter thanking the

company for cooperating during the audit.
13.2.2 Audit Report
13.2.2.1 Audit objectives
a) The following objectives should be clearly identified in this section:
i) Evaluate the importer’s level of compliance with Customs

administered legislation
ii) Determine whether the importer’s accounting systems for the

imported goods can produce accurate and reliable information; and
iii) Assist the importer in increasing compliance
13.2.2.2 Scope
The scope section of the audit report is used to clearly identify to the company:
 Audit period subject to review;

 What was subject to audit;
 Which companies and locations were subject to the audit;
 What books and records were reviewed; and
 Re assessment.
13.2.2.3 Sampling Methodology
30
This section will summarize the sampling methodology used (variable/attribute)
what was used to select the transactions that were audited during the review.
An explanation as to any supplementary sampling would be included here.
13.2.2.4 Findings
The findings section of the audit report should be presented by the segments
reviewed, systems description, program compliance review. Responsibility for
preparing the findings section is tasked with the audit team leader, with input
from all team members. Each findings section of the audit report should
include:
 Summary of findings.
 Conclusions
 Error rates
 Recommendations
 Client response
13.2.2.5 Appendices
The detailed findings of the program compliance reviews (classification,

valuation, trade data and statistics) as they relate to the samples should be
included in an appendix.
13.3 REVIEW AND APPROVAL
The audit report is not considered complete until it has been reviewed and
approved by customs audit management. Senior management will establish the
actual review and approval procedures. Suggested responsibilities of the team
members are as follows:
Audit Team Leader

Audit Manager
Audit Director
Audit Team Leader
 Ensures that information received from all team members is timely, accurate
and complete;
 Ensures that the audit report covers all aspects of the Customs programs
and provides sufficient evidence to support findings and conclusions;
 Brings to the attention of the manager any issues on which the company
does not agree with the recommendations;
 Completes the file competitions check list; and
 Provides appropriate parties with interim and final reports.
Audit Manager
31
 Reviews audit file using supervisor’s checklist;
 Reviews interim and final audit reports before they are sent to the company,
ensuring all conclusions and recommendations are supported with
documentation contained in the file; and
 Ensures that the reports follow the standard format and that the attached
schedules are both appropriate and accurate.
Audit Director
 Reviews reports, either through a review of the audit file or through

discussion with the Audit Manager.
14.0 PRESENTING THE INTERIM AUDIT REPORT
Whenever possible, the interim audit report should be presented in person to

the company by the audit team. Where this is not possible or advisable, the
report should be sent by registered mail and followed up with a telephone call to
provide any explanations or to answer any questions the client may have. The
interim report (audit team copy) should be fully cross-referenced to the audit
file so that easy reference can be made to the working papers if the client has
any questions. The client should be advised that they will be allowed a certain
amount of time to provide a response – statutorily imposed or by way of policy.
11.1 AMENDED REPORTS
An amended report may be necessary in circumstances where an error occurred

in the original report where changes are made as a result of additional
information being supplied by the company, or where there are ongoing issues
that could not be resolved during the audit process. To avoid confusion, an
amended report should be clearly differentiated from the original audit report,
by stating in a separate paragraph or stamping that the original report has been
withdrawn or superseded.
14.2 FORMAT
All pages of the post clearance audit report should contain:
 A header e.g “ X Revenue authority” or similar text;
 Date;
 File number and Customs Office;
 Company’s name, business number;
 Audit period verified.
Any labelling which reflects the security or privacy grading of the document
should also be included. (Protected – Personal and Confidential)
END
32
EACH OFFICER SHOULD HAVE GENERAL KNOWLEDGE OF THE
FOLLOWING BEFORE ATTEMPTING TO START ON AN AUDIT.
RISK INDICATORS – IMPORTS
Referrals to Post Audit will be either by computerised random selection or

selection made following Customs intervention at the border being
documentation checks, yellow coded and documentation and examination, red
coded.
Audit risk analysis will therefore be guided to some degree by referral

recommendations, team reports etc., reporting the appraisement of a single
transaction, import. Post audit will analyse imports for risk prior to audit
activity at the premise of the importer or
C & F Agent’s premises. This will be by the analysis of previous Bills of Entry
as entered to in the country’s entry ‘s IT declaration system e,g Asycuda, Bofin
etc with data downloaded according to importer, supplier, commodity, origin
etc.
Major areas of Risk

 There are a number of them, but the following are common in Customs
Risk assessments:
 Value-Wrongly declared
 Classification-Misclassification
 Preferential trade programmes-Abuse of rates
 Transhipment-Potential for dumping
 Quantity-Mis-declared
 Clearing Agents-Often Involved in forgery
 Staff corruption
 Poor internal controls-Mis management of data/records
 Porous border-Potential for Smuggling
 Warehousing-Potential for loss of revenue
 Transit –Potential for Dumping
 Poor company records-Potential for tax evasion/avoidance
 IT related problems-Potential for forging documents, loss of data etc
 Inability to identify Risk due to lack of knowledge
 Origin of goods-If falsified
 Undisclosed money transfers.
Risk indicator examples are given below.
Supplier
Relatively consistent unit values for same goods.

Number of importers supplied, are they the same company/person by different
names?
Does the country of origin remain consistent?
Are the goods consistent with the supplier’s business?
Is the supplier well identified on invoice or vague as to identity and location?
Is the supplier located in the country of export?
Is the supplier merely a last process manufacturer e.g bottler
33
Importer
Is the importer well identified?

Is the importer a regular importer?
Are the goods consistent with the importer as business?
Is there a relationship between supplier and importer?
Do volumes or quantities imported match the size of the importers business?
Tariff Item Number
Consistent – same goods description = same tariff item?

Tariff item correct?
Change of tariff item but same supplier?
Origin
Are the goods expected from the declared source country?

Should there be inland freight charges to port of export?
Does the B/L match declared origin?
Are the goods manufactured or imported into the exporting country?
Is the supplier in the country of manufacture?
Shipping Bill of Lading
Weight consistent with goods

Freight costs reasonable for declared value of goods
Is the route from exporting country to Bangladesh normal?
Why are the goods air freighted?
Unusual instructions on arrival?
Insurance costs reasonable to value declared for the goods?
Origin matches invoices source country.
Invoice
Is the invoice a commercial standard of document?

What is the currency used?
Are the terms of payment given?
Who is the consignee, are they clearly described?
Is the description of goods clear or vague?
Who is payment to be made to e.g is there a selling agent?
Supplier identifiable?
Valuation
Is the invoiced value the full transaction value?
Where goods supplied by the consignee in part payment?
Assists? Has the consignee supplied parts, moulds, materials, directly or
indirectly?
Is there a possibility of royalty payments on these goods?
Cash discount deducted from transaction value?
Are the goods on consignment?
Is there evidence or purchase through a selling agent.
Cost of packaging included?
Inland freight payable only?
34
“OPTIONAL”
CLASS PRACTICAL EXERCISE (S) ON VALUATION VERIFICATION.
Valuation Examples
Here the trainer is supposed to avail to the trainees’ sampled invoices of

his choice or request the trainees to come with some from their offices.
This exercise relates to a post audit of imports. Assume you are at the premise
of the importer and have selected these invoices for substantive testing, to
identify errors within the system.
Get documents, copies of invoices etc that supported various bills of entry. As
part of the analytical review process the trainees are required to identify risk
indicator to errors that may have occurred at the time of entry.
For each invoice write down the risk indicators that you think are relevant to
the audit.
Etc.
35

COMESA PCA MANUAL

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

COMESA PCA MANUAL

Uploaded by

Copyright:

Available Formats

Comesa Post Clearance Audit

COMESA POST CLEARANCE AUDIT MANUAL.

Post-clearance audit is a process, which enables Customs Officers to:

 Assess a client’s overall compliance with customs administered legislation;

Customs post clearance audits allow Customs authorities to verify compliance

The use of Customs Post-Clearance Audits on a “periodic” basis by Customs

 A greater emphasis on trade facilitation due to the dramatic increases in the

Transactional reviews continue to form a part of overall verification strategy,

Post – clearance Audits can be performed as “desk audit” process or on-site at

1.2 WHY CUSTOMS AUDIT?

 With the introduction of GATT valuation, emphasis is placed on fast

1.3 Post Clearance audit therefore enables Customs officers to: -

 Assess a clients overall compliance with Customs administered

1.4 Advantages of customs audit to customs and our stakeholders.

 It ensures greater compliance with Customs laws, regulations and

Enhances the audit function of a Customs administration and reduce

1.5 Customs Risk Management.

1.5.1 Definition of Risk.

2.0 Risk assessment, Profiling and Selectivity

3.0 Risk Assessment

Since a number of COMESA members are applying Asycuda system in

4.0 Legal Authorities

The laws of most nations require importers, clearing agents (brokers),

Customs legislation also provides Customs authorities to demand the

4.1 Generally Accepted Accounting Principles

Generally Accepted Accounting Principles (GAAP) refer to the recognized

 Which economic resources and obligations should be recorded

4.2 Recruitment and training.

In most countries, auditing is a profession, with a professional association,

5.1 POST IMPORTATION AUDIT STANDARDS

5.1.1 POST IMPORTATION AUDIT STANDARDS

a. Audits must conform to the General Annex of Kyoto Convention”

b. Audits should be adequately planned, executed, supervised and

c. Audits should be conducted with due consideration to the company’s

d. Audits should be conducted objectively.

e. Audits should be conducted to determine baseline compliance levels of

f. Program compliance should be determined by officers qualified to do so

g. Sufficient and appropriate audit evidence must be obtained by

h. Audit activities should be completed and an interim report presented to

i. The audit report should:-

i. Indicate the scope of the audit

5.2 WORKING PAPERS

There are two types of working papers:

Includes correspondence, company tour notes and observations, records of

2. Obtained by the officer

Copy of trial balance, flowcharts, organizational charts, purchase orders,

5.2.2 Purpose of Working Papers

Assist the officer throughout the audit by:

 Documenting the objectives and approach to the audit (planning

Document the systems and internal controls of the company including

Provide a link between planned audit programs (objectives and procedures) to

 A description of the procedures followed (audit program)

Provide a basis for supervision and review by:

5.2.3 Characteristic of Good Working Papers

The characteristics of good working papers are organization, completeness,

The individual customs authority generally establishes standard methods of

The audit objective;

Clarity and Completeness

Working papers should be devoid of trial non-essential information and

Ease of review requires not only good organization, it also requires:

 Logical summation of results;

5.2.4 Preparation of Working Papers

5.2.5 Confidentiality of information

Access to paper files should be closely controlled to ensure document security