Richard Cornelisse

Testing the effectiveness of a VAT Control Framework using data analytics

In Audit Defense, EU development, Indirect Tax Automation, Processes and Controls, Technology on 23/05/2014 at 12:00 pm

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KEY Group’s core expertise is designing, improving, implementing VAT compliant processes and testing the effectiveness of a VAT Control Framework. To test such a framework a tailor-made exercise is needed as every industry has besides generic risks its own specific risks.

Why tailor-made?

More and more tax administrations around the world are implementing electronic auditing of a business’s financial records and systems. Countries are adopting tools that can interrogate such records.

E-invoicing and iDocs have been implemented by many multinationals. Although the perception is that these processes are VAT compliant by default, we have discovered VAT errors, i.e. incorrect exchange rates for VAT at several multinationals. This could result in substantial amount of rework, commercial and reputational risks, and VAT assessments by tax authorities.

The defects in the area of e-invoicing, iDocs and exchange rates will normally not be found via standard analysis. These potential risk areas need to be assessed as any errors will likely exceed the company’s risk appetite.

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