Compliance Audits: A Guide to Ensuring Regulatory Adherence

A compliance audit formally evaluates an organization’s procedures and operations, focusing on determining whether the organization is adhering to its internal rules, regulations, policies, decisions, and procedures.

The resulting audit report assesses the organization’s compliance preparations, security policies, risk management processes, and user access controls observed during the audit.

Why Is Conducting Compliance Audit Important?

This type of audit also reviews the effectiveness of an organization’s internal controls. Internal financial, operational, IT, or regulatory audits are conducted to ensure that the organization follows standards before an external compliance audit is performed. Both internal and compliance audits use similar language and software to provide comprehensive reviews. Operational audits assess the efficiency and effectiveness of various departments and activities in alignment with the organization’s mission. Audit monitoring helps organizations validate processes related to critical data security, financial records, health and safety, payroll and HR policies, and management standards.

Firstly, internal audits help organizations identify areas of risk, potential fraud, and inefficiencies in their operations. Internal auditors can recommend improvements to help the organization operate more efficiently and effectively by reviewing and evaluating internal controls and processes.

Secondly, internal audits can help ensure that the organization complies with applicable laws, regulations, and industry standards. This can reduce the risk of legal and regulatory penalties, fines, or other consequences resulting from non-compliance.

Thirdly, internal audits can help assure management and stakeholders that the organization’s financial statements and other information are reliable and accurate. This can improve the credibility of the organization and help maintain stakeholder confidence.

Internal audits are an important part of an organization’s risk management and control framework and can help the organization achieve its strategic objectives while minimizing risks and ensuring compliance with applicable requirements.

Different Types of Compliance Audits

Compliance audits come in various forms and are essential for businesses to ensure that they adhere to regulations and standards. These audits evaluate whether an organization meets its external obligations in line with agreements, rules, regulations, or codes of conduct.

Here are a few types of compliance audits:

HIPAA (Health Insurance Portability and Accountability Act) is a federal law that is applicable to healthcare organizations and sets guidelines for the privacy and security of personally identifiable information. HIPAA protects people who change jobs, are self-employed, or have previous medical problems. HIPAA compliance audits evaluate whether covered entities and business associates follow privacy, security, and breach notification requirements to protect individuals’ sensitive health information.

SOC2 compliance audit refers to an evaluation of a service organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. An auditor conducts this audit to provide assurance to customers that the service organization has established and implemented effective controls to protect their data and ensure the confidentiality and privacy of their information. SOC2 compliance audits follow the American Institute of Certified Public Accountants (AICPA) Trust Services Criteria and involve a thorough examination of the organization’s policies, procedures, and operational activities. Organizations that pass a SOC2 compliance audit can demonstrate their commitment to data security and gain a competitive advantage in the marketplace.

The Payment Card Industry Data Security Standard (PCI DSS) is a global standard that aims to protect cardholders’ private information and boost the security of credit, debit, and cash card transactions. PCI DSS compliance audits ensure businesses follow the standard’s security controls to secure payment card data.

SOC 2 audits assess the cybersecurity of service providers such as data storage firms, payroll processors, law firms, or others that provide services to corporate organizations. These audits evaluate whether an organization’s information systems meet security, accessibility, processing integrity, confidentiality, and privacy criteria.

The Sarbanes-Oxley Act (SOX) was passed in 2002 in response to several accounting scandals in the early 2000s. Its goals were to enhance auditing and public transparency. SOX requires large publicly traded companies to have annual external audits of their internal controls over financial reporting. SOX compliance audits assess whether companies’ internal controls are operating effectively to ensure the accuracy and completeness of financial reporting.

Steps Involved in Implementing Compliance Audits

Compliance audits are typically implemented in a series of steps:

1. Planning: The first step in a compliance audit is to plan the audit. This includes identifying the audit’s objectives, determining the audit’s scope, and developing a plan for conducting the audit.

2. Data collection: The next step is to collect the necessary data and information to support the audit objectives. This may involve reviewing policies, procedures, contracts, and other documentation and conducting interviews with employees and stakeholders.

3. Testing: Once the necessary data has been collected, the auditor will typically perform testing to evaluate compliance with applicable regulations, standards, or policies. This may involve reviewing transactions or other records, observing processes, or conducting other types of testing.

4. Reporting: After completing the audit, the auditor will typically prepare a report that summarizes the audit findings and identifies any areas of non-compliance or opportunities for improvement. The report may also include recommendations for corrective action to address any identified deficiencies.

5. Follow-up: Finally, the auditor may conduct follow-up activities to ensure that any recommended corrective actions have been implemented and are effective in addressing the identified deficiencies.

Overall, implementing a compliance audit requires a systematic and thorough approach to evaluating compliance with applicable requirements, and typically involves close collaboration with key stakeholders in the organization.

Who Can Perform a Compliance Audit?

When it comes to performing a compliance audit, there are different types of auditors who can conduct these assessments. An internal auditor, who is typically an employee of the company, can perform an internal audit. The objective of the internal audit is to identify the overall risks to compliance management and security. The internal auditor assesses whether the company is following internal controls and guidelines, such as corporate bylaws, policies, and procedures.

The reports generated by these internal audits, which are performed throughout the fiscal year, can be used by the board, compliance officers or company executives to detect shortcomings in their regulatory compliance processes. These reports help executives determine areas that require improvement or corrective action.

On the other hand, external audits are formal compliance audits conducted by independent companies. These audits follow specific formats based on the compliance programs that are being assessed. Depending on the scope of the audit, external audit reports assess whether an enterprise complies with federal, state, or corporate regulations and standards. Certified public accountants are often compliance auditors.

Regulators use auditor’s reports to assess possible fines for noncompliance. These reports help executives prove that their organizations are complying with regulations. The information gathered from a compliance audit also helps organizations reduce risk and avoid possible federal fines or legal problems associated with non-compliance.

Simplify Your Audit Management Process with VComply

Simplify your audit management process with VComply’s integrated audit planning and execution software that lets you efficiently collect, verify, and process audit data.

Create a Repeatable Audit Process with VComply

Conduct the audit using the audit plan and scope – with the audit plan and scope in place and tasks assigned to auditors, the audit can be conducted using the audit plan created in VComply. The audit checklist serves as a guide for auditors, ensuring that all necessary tasks are performed during the audit.

Document the audit findings in VComply:

As the audit is being conducted, it is important to document the findings in VComply. This includes recording any issues or deficiencies identified during the audit and any corrective actions that need to be taken.

Generate an Audit Report Using VComply’s Reporting Module:

After the audit is complete, an audit report can be generated using VComply’s reporting module. The audit report should include a summary of the audit findings and any recommendations for improvement or corrective actions that need to be taken.

Share the audit report with relevant stakeholders: Once it is generated, it should be shared with relevant stakeholders, such as management or regulatory agencies. VComply makes it easy to share audit reports securely and efficiently. Implement corrective actions, if necessary: Based on the audit findings, corrective actions may be taken to address any identified issues or deficiencies. VComply can be used to track and manage these corrective actions, ensuring that they are completed promptly and effectively.

Monitor compliance status using VComply’s compliance library and risk assessment module: Finally, VComply can be used to monitor compliance status on an ongoing basis, using the compliance library and risk assessment module to identify any potential compliance issues or risks. This helps organizations stay ahead of compliance requirements and minimize non-compliance risk.