The Challenges of Post Clearance Audit in Ethiopian Revenues and Customs Authority: The Case of Addis Ababa Kality and Mojo Dry Port Customs Branch Offices

Abstract

The increasing global demand towards trade facilitation that reduces customs intervention on physical inspection during clearance proportionately increases the activities of PCA control. The main objective of this study was to assess the major challenges in the implementation of Post Clearance Audit in Addis Ababa Kality and Mojo Dry Port Customs Branch Offices. In particular, it investigated the level of competency of the PCA staff, the extent of application of risk management technique in PCA, the degree of harmonization of the PCA with respective departments, and the extent of quality assurance review of audits. To achieve these objectives, both quantitative and qualitative research approaches were used and data were collected from primary and secondary sources. The primary data were collected using survey method from the PCA staff and the management of the respective offices, and also from customs clearing agents and traders. Descriptive statistics through the application of SPSS (21 version) were employed to analyze and interpret the data. The findings of the analysis provided that majority of the PCA staff members lack the required skill and competency to undertake effective PCA, no automated risk management is currently applied for the purpose of PCA, there is weak coordination in exercising joint audits, and no central monitoring and quality assurance mechanism for PCA outcomes is established in ERCA. Finally, the researcher recommends that the PCA staff should be equipped with comprehensive and advanced technical training skills tailored to today’s complex international trade transaction and sophisticated accounting systems, ERCA should establish a risk management unit with in the PCA directorate which is dedicated to risk profile development, central audit case selection and risk analysis for targeting potentially high-risk traders/operators, the PCA directorate should initiate, guide and coordinate joint audits of PCA with domestic tax audit and across Customs Branch Offices to detect and deter potential non-compliance, and ERCA should put in place a monitoring and quality assurance unit in order to evaluate the performance of the PCA program. As a conclusion in order to respond to the global pressures exerted towards trade liberalization and facilitation, customs administration are forced to change their approaches from preclearance to post clearance controls. However, implementation of risk-based post clearance audit controls require a significant investment in material and human resources .With this view, customs authorities need to adopt and maintain international standards and best practices so as to ensure quality audit.