Triggers for an independent audit.

Filers ask many questions about the trigger(s) for the independent DFCM. 


What will determine if we must obtain an independent audit of our due diligence process? 

If a filer determines that a product includes a conflict mineral (any of the 3T&G) that comes from a Covered Country, then they must conduct additional due diligence, and obtain an independent audit of their due diligence process.  For the first two years, SEC allows a conclusion of “conflict undeterminable”; if the filer concludes this, then no IPSA Audit is required.  In addition, if the filer determines that their products are free of conflict minerals, no IPSA Audit is required.


We’ve sent hundreds of questionnaires to our suppliers, and we’re still waiting on many of them to come back.  Shouldn’t we wait until we get more information from our suppliers? 

The slow response rate from suppliers has been a common complaint among filers.  DFCM is not a performance standard or a ban; it requires a due diligence process.  You can (and should) pursue more complete data from your suppliers, but at some point you will need to make the appropriate determination about conflict minerals in your products.  If you have conflict mineral(s) in products, you will need the independent IPSA audit.  


We heard from 50 suppliers.  All of them said they didn’t know if they had 3T&G from Covered Countries – except one, who said they did.  Do we have to get a IPSA audit? 

The rule does not include provisions that would exempt you from getting a IPSA audit in this circumstance.  In a word:  yes.  Some filers have confused this scenario with the “de minimis” concept, which was an issue in the lawsuit brought by National Association of Manufacturers and others.  This de minimis concept applies to the amount of 3T&G in a product – not to the number of responses to the supply chain survey. 


Can we do a IPSA Audit if the rule doesn’t require one? 

Nothing in the rule prevents you from getting an independent IPSA Audit if you determine your products are free of conflict minerals, or if you are “conflict undeterminable.”  


Why would/ wouldn’t we want to do that?

The complexity of supply chains are such that many filers are likely to learn – eventually - that their products contain conflict minerals.  You’ll need a IPSA Audit then.  Getting an independent IPSA audit now – before it’s required, and when you don’t have to include the audit report in your SEC filings – will prepare you for what to expect when you need one.  Correct gaps now, before they “count” in an audit that is filed.  In addition, auditors really are here to help you.  We may identify ways you can improve your DFCM compliance program, and/or reduce costs. 

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