Tariff changes create overlooked vulnerabilities that become costly when internal audit, or IA, isn’t involved early. Proactive audit involvement ensures that potential risks are identified and mitigated before they escalate, safeguarding compliance and operational efficiency.
Ask any manufacturer or company that imports or exports: tariff impacts hit immediately. Shipments slow. Long-standing pricing models no longer hold. Supply chain teams scramble to reassess vendor relationships, while procurement is pushed into high-pressure renegotiations.
Finance keeps updating margins on the fly, often without reliable cost information. Even small mistakes in classifications or assumptions distort forecasts. For companies with global suppliers or multi-country sourcing, tariff changes drive up costs so quickly that profits shrink before strategy can catch up.
Example: A distributor relying on suppliers in Germany and China gets hit with classification changes on metal components. The tariff reclassification adds a potential $1.2M to their quarterly Cost of Goods Sold (COGS). Because they’re locked into fixed-price customer contracts, they can’t pass through the increase. Profitability plunges until contracts renew.
Some organizations attempt workarounds: shifting production, rerouting shipments using intermediary countries. While these tactics may reduce duty exposure temporarily, they create new risks: higher logistics costs, longer lead times, fragmented oversight and more complex compliance obligations. Worse yet, they can trigger Foreign Corrupt Practices Act exposure, the U.S. law prohibiting bribery and requiring accurate financial recordkeeping.
Simply put, tariff volatility exposes cracks in internal controls, vendor oversight, data governance, supply chain visibility and financial reporting. Most of these vulnerabilities remain invisible until something breaks: a misclassified HS code, missing origin documentation, an unexpected duty assessment or a shipment stuck at port.
While many CFOs acknowledge the cost and uncertainty tariffs introduce, the downstream implications often remain hidden. Tariff changes alter documentation rules, country-of-origin tracking and cross-border compliance in ways that aren’t immediately obvious. The moment the rules shift, organizations must maintain complete, accurate origin records, which becomes far more complex when goods pass through multiple borders.
Tariffs can be seen as operational problems rather than enterprise-wide risks. As a result, IA is often brought in late. Leaders may know tariff risk exists, but they rarely understand its full extent until the crisis is already unfolding. By then, IA isn’t preventing issues; it’s cleaning them up.
What surprises organizations most is how quickly small sourcing changes can snowball into major operational challenges. A routing adjustment that looks minor on paper can fundamentally reshape documentation requirements, compliance obligations and supply chain timelines.
Even slight shifts in duty rates or origin criteria ripple through delivery schedules, margin assumptions, documentation loads, vendor onboarding and the accuracy of financial reporting. Early involvement makes these impacts far easier to anticipate and avoid.
Tariff delays also collide with modern “just-in-time” strategies. With limited storage buffers, brief disruptions caused by classification questions, missing documentation or sudden rule changes can halt production. The ripple effects include unscheduled downtime, temporary furloughs and stalled revenue.
Operational delays quickly become financial ones. Companies still owe port fees, freight charges and vendor invoices even when goods sit offshore. Cash flow tightens. Payables stretch. Loan covenants strain. In severe cases, stalled shipments directly threaten liquidity.
One of the most common missteps by organizations is assuming existing controls will hold up during a tariff shift. In reality, tariff-driven disruptions often reveal weaknesses traditional assessments miss:
And these challenges aren’t limited to manufacturing. Food producers, life sciences, technology, consumer goods — any organization with global suppliers or multi-country routing can experience similar shockwaves. Even everyday goods rise in price as upstream suppliers absorb tariff-driven cost increases. There is good news, however.
Internal audit is uniquely equipped to identify tariff-driven risks early because of its cross-functional reach. Its value cannot be stressed enough, especially when you consider how data moves through procurement, tax, finance, logistics and operations. Internal audit can pinpoint where documentation is incomplete, where classification decisions are unverified, where supply chain transparency breaks down and where controls no longer match current operating conditions.
It delivers the greatest value when it’s involved before supply chain shifts, vendor changes or routing adjustments are finalized. Any move toward new regions, new critical suppliers or new sourcing structures warrants IA review upfront, not after shipments stall or compliance problems emerge.
Bottom line: IA becomes a forward-looking advisor, helping the organization anticipate tariff-driven risks instead of scrambling to address them after the fact.
Tariff volatility isn’t slowing down, and if IA is late to the table, your supply chain, controls and financial reporting will remain exposed. Armanino’s internal audit experts can help you strengthen resilience, safeguard performance and build anything — the operational discipline, compliant processes and adaptive strategies needed to navigate today’s unpredictable tariffs.
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