Skip to Content



Internal control health assessment: What about your foreign affiliates?

January 18, 2016 Blog 1 min read

As the pendulum of internal controls swings to a more conservative approach, many middle-market companies and larger, privately held organizations are starting ask, “What about my foreign affiliates?” To be sure, many organizations that have taken a holistic approach to risk management should have identified critical business and financial risks at foreign operations, but many have ignored smaller (less financially impactful) entities.  While this may be a cost-effective approach to internal controls, it’s often these small operations that can have a significant control failure (or lack of control to begin with) that results in a material audit adjustment, FCPA violation, or other operational failure.

High-performing, well-controlled organizations establish baseline control objectives throughout the global organization — both from an entity level down to the operations (including sales offices) and from a financial and operational perspective. Smaller foreign operations shouldn’t be required to house a control suite similar to that of its parent organization.  These organizations should have certain controls and expectations to meet on a monthly, quarterly, and annual basis that ensure the integrity of financial information is maintained, operational objectives are met, and compliance requirements are upheld.

Whether entering a new foreign market or executing a control health-assessment, organizations are encouraged to understand the current state of internal controls, communicate openly with their foreign entities, and develop a defined work plan to establish a system of internal controls with recurring (not necessarily annual) assessments of the operating effectiveness of those internal controls.

Please contact Plante Moran’s International Concierge Desk at internationaloffice@plantemoran.com   for more information regarding global internal controls implementation.

Related Thinking

Foreign tax credits: What’s in your basket

Webinar 60 min watch

GILTI: The new era of global taxation and planning

Webinar 60 min watch

FDII benefit updates: Navigating the proposed regulations and maximizing tax savings on foreign income

Webinar 60 min watch