Compliance Audit

Governance, Risk and Compliance, popularly abbreviated as GRC, are the most important elements any organization must put in place in order to achieve its strategic objectives and meet the needs of its stakeholders. A business must comply with specific rules and regulations. But how does the business know that it is adhering to all regulatory guidelines, laws and standards? An independent compliance audit evaluates if all the applicable rules and laws are being adhered to or not. This articles gives an in depth perspective of compliance audit and its importance.

A compliance audit is a formal and external review of an organization’s procedures and operations to ensure that the company is following all the applicable rules, laws, standards, regulations and code of conduct. In other words, a compliance audit is a way by which a company gets to know whether it is doing what it is supposed to do and whether its work is conforming to a basic required standard. Compliance Audit also determines if the company is abiding to an agreement and whether it’s IT and security issues, HR laws and its quality management systems are in place.

Compliance audit is often mistaken to be internal audit. However these represent different approaches. Internal audit ensures that a company follows its own internal processes, procedures and guidelines. This audit prevents and detects errors or illegal acts. On the other hand, a compliance audit is done to ensure that the company is following outside rules, regulations or codes of conduct.

Purpose of a Compliance Audit

A compliance audit is done to gauge how well a company adheres to rules, regulations, standards and code of conduct. This audit identifies the complaint versus the non-compliant process in the company. It also provides recommendations on the corrective actions to be taken by the company for the non-compliant processes. Compliance audits also ensure that the company complies with the frequently changing regulations. These audits also identify the areas of risk for non-compliance within the company and reports these appraisals to the management and the appropriate regulatory entities.

The standards a company has to meet in order to get through the compliance audit will depend on the following

  1. Whether the company Is a public or a private limited one
  2. The sector in which the company is operating
  3. Local laws and regulations the company needs to abide
  4. The nature of jobs the company has

A compliance audit is carried out by an external, independent party to eliminate any scope of bias and ensure that things are fair.

How to Prepare for a Compliance Audit to Prevent Penalties

1.Perform a Self-Audit

Before going in for an external compliance audit a company can conduct an in-house audit. This will help the company to know if any processes need to be fixed or documents need to be updated in order to pass the real test. This self-audit could be done by the company’s compliance officer or an internal employee.

  2.Train the Employees

A business is dependent on its employees, both on-site and remote, to ensure compliance. Hence, training the employees on various parameters like security policies, reading and understanding financial statements, Internet safety concerns, reading emails, setting passwords, storing personal information, etc. In this way the company be assured that its employees are ready for an external compliance audit.

3. Monitor Activity of Business Users and Vendors

Visual recordings can be used to monitor all user activity on any server or any work station. This helps the company to know who did what and how they did it.

4. Do Your Own Research

The company needs to find out what audits apply to its specific business and make sure that the standards are met. Similarly it need to keep a track of the security events happening within the industry to make sure that all it internal systems and network are protected.

5. Keep a Track of New Regulations

The ever-changing technology leads to changing security landscape making it necessary for companies to continuously keep a track of any new regulations and ensure compliance to them. This is not easy since any new compliance involves many people and changes to many systems.

6. Be Always Prepared

No matter how big or small a company is or which industry it is in, it has to clear the compliance audit. The best way to do so is be ever prepared by having all the documents, systems in place and be ready to furnish any information required by regulators as quickly as possible.

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