Compliance Auditing - Regulations and Processes

 The rules that society follows are essentially the agreements that we will undertake in a prescribed manner for the health, safety, and benefit of all. In business, rules and conventions may be voluntary to state that products and services follow certain standards, or they may be mandated to follow federal or local rules and regulations. Adherence to voluntary and mandatory standards is confirmed through compliance audits. These periodic surveys, processes, procedures, files, and documentation are conducted by professionals or government auditors hired for-profit and nonprofits. These surveys verify the effectiveness of internal controls and procedures to meet standards and regulations.

In this article, we discuss several voluntary standards and mandatory regulations that require audits, how compliance audits are conducted, and how auditors are trained and continue to maintain their professional edge.

What is a compliance audit?

A compliance audit is an independent assessment, to ensure that an organization is following external laws, rules, and regulations or internal guidelines, such as corporate bylaws, controls, and policies and procedures. Compliance audits can also determine whether an organization complies with an agreement, such as when an institution accepts government or other funds. Although most people are familiar with financial audits, such as personal or corporate tax audits for public companies through the Sarbanes-Oxley Act (SOX) or through the Internal Revenue Service (IRS), compliance audits are not just financial. Audits can also review compliance with IT and other security issues, human resource laws, quality management systems, and other areas. Compliance is a leg up in the tripod of GRC, which stands for Governance, Risk, and Compliance.

Purpose of Compliance Audit?

A compliance audit shows how well an organization complies with rules and regulations, standards, and even internal bylaws and codes of conduct. A part of the audit may also review the effectiveness of an organization's internal controls. Different departments can use several types of audits. For example, accounting may use internal, compliance, and operational audits. Audits by different levels of government may be required.

  • Internal audits
  • Compliance audit
  • Operational audit

Compliance Auditing Challenges

Compliance may appear to present organizations in which they are liable for penalties whether or not they work to comply. Deficiencies found in regulatory audits may be subject to fines. However, deficiencies that are not discovered in any audit may still subject an organization to third-party litigation.
How to improve compliance auditing

Compliance auditing is complex and as such, you should ensure that your organization is ready for audit. One way to get ahead of the process is to use a tool that allows you to document and track your organization's history over time.


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