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L’audit et le contrôle des filiales étrangères à l’épreuve du confinement

November 6, 2020

For two months now, confinement, physical distancing and teleworking when possible have imposed themselves on more than half of the planet. Partial unemployment affects more than one in two employees, obviously because of general economic under-activity, but also because of the inability to work effectively. Many audit and / or control departments who are limited in their movements and actions are sometimes led to put their activities on hold, while the context favors tensions and risks, making the control of subsidiaries even more critical. However, solutions for the continuity of control and internal audit of these subsidiaries exist.

1) An increase in risks, a decrease in control capacity?

The current crisis is health, but also economic. The risks of slippage, errors or fraud naturally feed on this context: manipulation of accounts to boost performance against the expectations of management, shareholders and financial markets, active or passive corruption for retention or obtaining contracts, or simply errors in accounting entries in degraded working conditions. Faced with this increased risk, we cannot accept a decrease in the level of control, the objective of which is twofold: detection of course, and also deterrence.

Auditors and controllers must therefore find efficient alternative modes of operation.

2) Digital obviously to exchange

In a few weeks, those most resistant to teleworking adapted to it, sometimes with a success that surprised them themselves. Video-meetings, weekly updates, common task management platforms, etc. all these solutions making it possible to make coordinated exchanges and work possible were quickly established.

However, being able to exchange information and communicate is not enough: it is necessary to have the raw material for control and audit: data.

3) Digital also for auditing

Two advantages of data:

- unlike us, it is immaterial. It can therefore be accessed and moved almost instantly.

-more often it is rather well structured, therefore easily exploitable.

Let us cite the example of this large French group where the majority of the audit and internal control department is now in reduced activity, without the possibility of traveling to the subsidiaries. In response to this constraint, management decided to implement a major campaign to analyze the accounting practices and flows of more than 100 subsidiaries around the world. After only 3 weeks, all the data is collected and the analyzes carried out:

  • Atypical local events are identified, probably requiring further additional investigations,
  • Cross-cutting problems, appearing in all the subsidiaries, are also observed, leading to the launch of a global reflection for the group on the processes concerned.
  • Potential savings avenues are discovered, particularly in the purchasing cycle and the relationship with suppliers from many subsidiaries, working without global negotiations.
  • A global overhaul of the audit program is made possible, effectively preparing the deconfinement and the return to a "normal" situation.

Accounting and financial data are rich in lessons if we have the means and the time to refine and analyze them. This is what the tax administration has been practicing for several years with the establishment of the FEC and the remote audit procedure. This process should not be reserved for external auditors and controllers! For this it takes time and efficient means:

  • Time: the context gives it to us, even imposes it on us.
  • The means of rapid and in-depth analyzes: they exist, demonstrate their effectiveness and are very accessible (in particular in a context of limiting travel expenses!).

In conclusion: Tetany? or acceleration of mutations?

Even more, limiting travel while being more efficient is part of an important sustainable development approach. It is therefore not a one-off reaction to the crisis, but a profound transformation. We must not come out alive, we must come out better!