Audit on the Rise: Accessing Data Across Jurisdictions Essential Post-BEPS.

• Author: Mehlman, Marc
• Position: Base erosion and profit shifting

The Action Plan on Base Erosion and Profit-Shifting (BEPS) set by the Organisation for Economic Co-operation and Development (OECD) is creating a high-stakes audit environment for multinational enterprises. With jurisdictions around the world enacting legislation to boost transparency and end corporate tax avoidance, a lack of data accessibility across jurisdictions could create a scenario ripe for audit--and it's time for finance departments to take action.

As most of us know by now, the centerpiece of the OECD's BEPS guidance is country-by-country (CbC) reporting, which requires multinational enterprises to report annually for each tax jurisdiction in which they do business. The goal is to ensure that adequate taxes are paid in the jurisdiction where profits are generated, value is added, and risk is taken. This means, of course, that organizations operating in numerous jurisdictions around the world must keep track of local regulations to remain compliant. Collecting, organizing, and reporting on this data by country can be a monumental task, to say the least.

Global trends in BEPS reporting are evolving as well. For example, tax authorities in Brazil and in several European countries have enacted SAF-T (Standard Audit File for Tax) as their standard for the electronic exchange of accounting data. This signifies a move to a more granular audit that enables tax authorities to look into transaction-level data, prompting multinational enterprises to boost technology and documentation to manage the potential risk of audit.

From the finance department and CFO perspective, audits that are not properly managed and under control can impact the company's effective tax rate, increase global exposure, and result in reputational damage. This is particularly true in R&D-intensive industry segments, like automotive, tech, and pharmaceutical, which are more vulnerable to audit on a global scale.

Existing Processes Not Enough

If your company is federally audited every couple of years, manual audit processes are certainly not enough given the intense scrutiny of the global tax environment. The post-BEPS world demands the ability to leverage data and create efficiencies. Because audit and controversy has been rewritten, the way audit software is built has also changed. Today, multinational enterprises can take advantage of innovative audit technology to meet the challenges of a high-risk landscape.

Consider this example: prior to adopting audit management...