Companies are struggling to comply with increased regulations and the growing complexities of financial reporting and tax rules.
In fact, a recent survey by Ernst & Young found that nearly two-thirds of financial executives feel changing regulations will challenge their compliance and reporting processes.
Remarkably, 64 percent of the Fortune Global 500 participating in this study said their companies experienced unplanned tax audits within the past year, with almost half receiving unexpected tax assessments or penalties.
The survey results, summarized in the report Seizing the opportunity in Global Compliance and Reporting, identified key areas where companies can improve global compliance and reporting (GCR). For instance:
More than 40 percent of respondents indicated a lack of global governance of statutory financial filings, and more than 60 percent indicated no global governance over direct and indirect tax filings by their companies. As Ernst & Young points out, deficiencies like these suggest that current GCR models require greater control, visibility and accountability.
More than three-quarters (82 percent) of respondents said they consider the need for local knowledge a significant barrier to moving compliance and reporting to a regional or global shared service center. Between 64 percent and 78 percent indicated that local-country resources are vital to successful compliance with tax and regulatory requirements. Clearly, these results suggest that local in-house expertise is another increasingly important component of successful GCR.
Forward-thinking companies recognize that it's time to revise and improve their methods for tax and financial reporting.
"Globalization and the drive for sustainable cost advantages change the way companies position their financial and tax operations. Companies are seeing an increasingly complex regulatory landscape and closer, cross-border collaboration by tax authorities under pressure to increase revenue," Steven Shultz, Ernst & Young Global Director of Global Compliance & Reporting Services, explained. "It is imperative that global businesses update their processes for statutory financial and tax filings to maintain compliance and competitiveness."
A copy of the survey is available at www.ey.com.