WCO PCA Flashcards
A structured examination of a business’ systems, records, and premises to measure and improve compliance with Customs legal requirements and other applicable laws.
POST CLEARANCE AUDIT (PCA)
The system of penalties established in Customs laws and regulations for non-compliance with PCA requirements.
Penalty Scheme
The entitlement of auditees to challenge decisions or findings made during a PCA process.
Right of Appeal
The development of policies and procedures for PCA, encompassing risk assessment, audit types selection, and standardized techniques.
Strategic Planning for PCA
The systematic approach to managing risks in PCA planning, involving steps like risk assessment, treatment, and monitoring.
Risk Management Process
Involves identifying overall risk posed by an entire sector or group of importers to target high-risk entities based on various factors.
Strategic Risk Management
Focuses on identifying high-risk transactions by specific importers or exporters considering values, volumes, types of goods, and past irregularities.
Tactical Risk Management
Involves assessing industry performance, individual auditees, and operational elements to pinpoint potential risks.
Risk Identification
Systematically uses available information to determine the likelihood and consequences of defined risks to establish the overall risk level.
Risk Analysis
Based on likelihood and consequence, evaluates and prioritizes key risks for detailed analysis and monitoring.
Risk Evaluation and Prioritization
Involves implementing control measures to reduce the likelihood or consequence of identified risks to align with organizational tolerance levels.
Risk Treatment
Involves documenting audit results transparently, communicating with stakeholders, and consulting throughout the process.
Recording, Communication, and Consultation
Integral steps to manage risk by assessing current risks, identifying new ones, and evaluating the effectiveness of compliance measures.
Monitoring and Reviewing Risk
Establishing intelligence networks to collect, process, and disseminate information for risk evaluation and decision-making.
Risk Intelligence Systems
Guidelines emphasizing integrity, confidentiality, professional competence, and impartiality in conducting Post Clearance Audit (PCA).
Ethical Standards for Auditors
A set of instructions aimed at enhancing collaboration between Customs and Tax authorities at the national level.
Guidelines for strengthening cooperation
The process of sharing data and details between different entities, such as Customs and Tax authorities, to improve coordination and efficiency.
Exchange of information
An importer, exporter, one who engages in transit or the like, who has a relationship with Customs, excluding forwarders, etc., who merely convey international cargos, and Customs brokers who merely submit declarations on behalf of the “trader”
TRADER
A entity selected for an audit, not limited to importers, as it can include exporters or transportation companies, Customs broker etc.
AUDITEE
Collective term for commercial or industrial enterprises usually referred to as the Customs’ counterpart
Business sector (or business community)
Group of productive or profit-making enterprises
Industry
Commercial enterprise, regardless of any relationship with Customs
Company
One who is involved in or affected by a course of action
Stakeholder
A business pattern with particular commercial / physical distribution of an import / export cargo, including the payment conditions
Whole business transaction / transaction / transaction pattern
Statement of an administration’s overall intentions and direction regarding PCA
PCA Policy
Scheme/strategy for audits specifying the objectives, scope, methodologies and assignment of auditor/team members for the audit
Audit Plan
An audit conducted at auditors’ premises usually by calling information through correspondence or telephone
Desk Audit
An audit conducted at the premises of the auditee
On-site audit
The overall objectives of PCA __
Assure that Customs declarations have been completed in compliance with Customs legal requirements as well as other requirements under any other law applicable in respect of import or export, via examination of a traders’ systems, accounting and other business records and premises
Means measures by which the Customs satisfy themselves as to the accuracy and authenticity of declarations through the examination of the relevant books, records, business systems and commercial data held by persons concerned.
Audit-based control
a mechanism to verify and review, either conducted by a company to review its own internal procedures or by Customs to review Customs’ own internal rules and procedures
PCA
May be useful for management purposes and are an important part of an integrity programme but are quite distinct from the concept of PCA.
Internal Audits
Types of Audit:
- Comprehensive audit (Systems-based audit)
- Focused audit (Issue-based audit)
- Post-importation Transaction-based audit (TBA)
This type of audit looks at the entire business control environment and the impact this might have
on Customs compliance.
Comprehensive audit (Systems-based audit)
Used heavily and substantive testing is reduced where control environment and corporate governance systems are good.
Analytical procedures
The amount of information to be examined by auditors is potentially large although it depends on __
Frequency Audit
Mostly relevant for administrations with a trader-focused targeting approach
Comprehensive audit (Systems-based audit)
This type of audit concentrates on one or a few areas of Customs e.g. valuation, country of origin
etc. Tests on related systems and controls and substantive tests may also be carried out.
Focused audit (Issue-based audit)
On focused audit — will be necessary to decide which type of audit is appropriate in each case, based on the most effective use of resources and the desired objectives
Criteria
Mostly relevant for administrations with an issue-focused targeting approach
Focused audit (Issue-based audit)
Post-importation Transaction-based audit (TBA) can work in two ways:
1) Referrals from the port/border post when an officer has doubts concerning a particular declaration at the time of clearance.
2) A targeting team scrutinizes individual Customs declarations after clearance and selects those where doubts arise regarding their accuracy.
Types of organizational structure:
- Centralized audit
- Decentralized audit
This structure has established a single PCA unit within the administration
Centralized Audit
This structure seeks to establish several PCA units within the administration.
Decentralized Audit
Advantages of Centralized audit:
- Enhanced communication, coordination and sharing of knowledge;
- Better supervision and management control; and
- More effective risk management.
Disadvantage of Centralized audit:
- Difficult to physically verify the business premises of trader prior to the start of the audit; and
- Field audit may be time consuming and costly particularly when auditors have to travel a long distance to conduct this exercise.
Advantages of Decentralized audit:
- Easy to locate and contact importer/exporter;
- Cost and time effective – more audits can be performed;
- Auditors of different regions can compete to perform better;
- Knowledge is improved in specific trade sectors; and
- Local risk factors are considered more effectively.
Disadvantage of Decentralized audit:
- Difficult to coordinate with other units;
- Lack of effective communication with each regional PCA units; and
- May lead to high administrative cost due to recruitment of additional auditors, managers and cost of training.
Aims to improve the level of voluntary compliance of traders and create the conditions necessary to facilitate voluntary compliance as the most cost effective and efficient approach.
Voluntary Compliance Framework
Segmentation of traders:
- Type 1 traders are voluntarily compliant;
- Type 2 traders try to be compliant but do not necessarily always succeed;
- Type 3 traders will avoid complying if possible;
- Type 4 traders deliberately do not comply
Voluntary compliance can be achieved through three broad ways:
1) Decreasing compliance cost;
2) Increasing incentives on compliance; and
3) Increasing probability of exposure.
“coordinated activities undertaken by administrations to direct and control risk.”
risk management
Often driven by necessity, as Customs administrations are often required to deliver better results with the same or fewer resources.
risk-based approach
risk management process:
- Establishing the context
- Risk assessment
2.1. Risk identification
2.2. Risk analysis
2.3. Risk evaluation and prioritization - Risk treatment
- Recording, communication and consultation
- Monitoring and review
These will form a fundamental basis for decisions made in the later steps of the cycle.
Risk Criteria
Risk Management Techniques:
(a) Strategic risk management
(b) Tactical risk management
Based on Customs being able to identify the overall risk posed by an entire sector or a group of importers. By identifying such a group, a Customs administration will be able to target all or selected companies within an industry sector identified as high risk.
Strategic risk assessment
This is the process of identifying groups of high-risk transactions by particular importers or exporters.
Tactical risk management
The systematic use of available information to determine how often defined risks may occur and the magnitude of their likely consequences.
Risk Analysis
Based on the determined likelihood and consequence of each risks. By considering the level of each risks, it is possible to evaluate and prioritize the key risks that need to be analysed in more detail and monitored thereafter.
Risk Evaluation
The key risks which were identified as to be monitored by the administration should be treated in
order to reduce the likelihood or consequence of the risks occurring by putting in place control
measures and actions that are intended to modify the level of risks to fit the organizational
tolerance.
Risk treatment
integral steps in the process of managing risk. This is necessary to:
determine if previously identified risks are still current/valid;
identify new risks;
reevaluate risk levels assigned previously in the light of updated information;
and evaluate the effectiveness of compliance activity/measures undertaken
Monitoring and reviewing risk
a product, derived from the collection and processing of relevant
information, which acts as a basis for evaluating risk and making informed decisions when
developing an audit plan.
Intelligence
units based in ports and airports
local intelligence units
unit that is able to collect and collate information and disseminate it throughout the entire service.
central intelligence unit
should proactively seek information from all available sources, which includes
border authorities, all other national government agencies, taxation authorities, open sources as
well as from any other country / jurisdiction.
Intelligence officers
publishes list of jurisdictions with strategic anti-money laundering (AML) / combating the financing of terrorism (CFT) deficiencies
Financial Action Task Force (FATF)
may serve the whole Customs department.
risk and intelligence team
cycle for planning a comprehensive audit (systems-based audit) programme/ audit cycle:
- Review and update risk management data
- Plan audit programme
- Select companies to audit
- Prepare for audit
- Conduct field audit
- Conclude: report, evaluate, follow up
This work could be carried out by a dedicated risk analysis/targeting team.
Targeting: selection for audit
based upon meeting the aims and objectives of the PCA team, which is also in
alignment with overarching strategy of the Administration.
Job profiling
essential to qualify a new post when setting up a new job, and a job
description is virtually indispensable when the Administration starts to recruit for a vacant post,
either internally or externally.
A good job profile
Ethical standards for auditors:
(a) Integrity
(b) Confidentiality
(c) Professional competence, due care and diligence
(d) Equity/Impartiality
The WCO has developed a Model Code of Ethics and Conduct that sets out the minimum required
attitude and behavior expected of all Customs officers. The Code of Conduct should be respected
in the context of conducting PCA.
Integrity
Auditors must maintain adequate levels of confidentiality when accessing and examining auditees’
records. Auditors should not disclose any business/Customs information they have acquired
during the performance of their duties, unless national laws provide for disclosure of information
in specific cases.
Confidentiality
Auditors should act diligently and in accordance with applicable technical and professional
standards. Further, they should take due care of the auditee’s property including account books,
systems etc., and respect company health and safety and security policies and requirements (e.g.
wearing of safety helmets).
Professional competence, due care and diligence
Auditors are required to be objective, maintain fair and just judgment over similar cases and not
to treat them arbitrarily or allow bias, conflicts of interest or undue influence of others to override
professional or business judgments. They should not misuse their authority over the auditee.
Equity/Impartiality
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