Compliance Audits

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Compliance Audits

The process of impartially assessing an organization to make sure that corporate bylaws, policies, and processes, as well as external rules, regulations, and laws, are being followed is known as a compliance audit. An organization's compliance with regulatory requirements is thoroughly examined during a compliance audit. In order to assess how you monitor and evaluate your performance in relation to these internal and/or external requirements, it also discusses the efficacy of your internal controls. An impartial audit of compliance should be conducted by a someone who is not associated with the job being audited; this individual need not be an external representative of your company.

Importance of compliance audit

Since compliance audits demonstrate an organization's conformance to laws, rules, and standards, they are crucial. Additionally, they provide complete transparency to your board regarding every aspect of your company, including those areas that might not get frequent attention.
Apart from enhancing comprehension of the company, compliance audits facilitate the development of stronger bonds between auditors and the performance-delivery teams, who seldom get the chance to interact with the board and management. Auditors can instill attitudes and practices that lead to positive change by interacting with the business as a whole.

Types of compliance audits

It's not unexpected that there are many different kinds of compliance audits given the diversity of emerging regulatory standards. The most significant are included here.

  1. The International Organization for Standardization (ISO) offers multiple audits for ISO conformity. Quality management systems are the focus of ISO 9001, environmental management systems are the focus of ISO 14001, and information security is the focus of ISO/ICE 27001, which assists businesses in managing many kinds of data.
  2. Health Insurance Portability and Accountability Act (HIPAA): HIPAA compliance audits guarantee the security of all patient data and are crucial for companies that offer services to the healthcare sector, insurance companies, and providers of healthcare.
  3. Payment Card Industry Data Security Standards (PCI DSS): All parties who receive, store, process, and transmit payment card data are obliged to undergo a PCI DSS compliance audit, which helps to keep cardholder and payment account data secure.
  4. The Sarbanes–Oxley (SOX) Act: Enacted in 2002, this law mandates that publicly traded corporations provide correct information about their shares.
  5. SOC 2: Designed by the American Institute of Certified Public Accountants, SOC 2 compliance audits demonstrate how businesses safeguard and secure cloud data by addressing data processing security, confidentiality, and privacy. SOC 2 audits come in two primary varieties.
  • Type 1 audits: look at how management characterizes the systems inside an organization and whether the control architecture is suitable. Reports from Type 1 audits are issued "as of" a specified date and are based on a predetermined timeframe.
  • Type 2 audits: these audits look at the operational efficacy of controls while also analyzing how management represents the systems inside an organization. Type 2 audits cover a longer time frame than Type 1 audits, often six to twelve months, thus they are more strict.

General Data Protection Regulation (GDPR): Since 2016, all businesses that gather, retain, or use personal data of EU citizens are required to abide by the GDPR, even if the data is kept outside of the EU. GDPR compliance audits make sure that safeguards against data breaches are in place and that data protection policies are followed.

Process of conducting a compliance audit

To conduct a compliance audit, you must consider a number of aspects, such as your company's status as private or public, whether it is subject to industry standards, and whether you must abide by local, state, or federal laws. These factors will also affect the audit's structure.
Regardless of the size or sector of your business, the following should be established by your compliance audit strategy:

  • Who will carry out the audit?
  • What should be covered in a compliance audit?
  • What happens to the outputs?
Choose and brief an auditor

Any audit of your compliance performance ought to be conducted by an unbiased third party. Because they will already have forensic investigation experience, if your company has an internal audit team, they may be the best candidates to lead your audit. You will have a compliance officer or department that can finish the audit if you work in a highly regulated industry, such as healthcare. An external, third-party auditor might be the best choice for some, particularly if no one in your company holds a suitable position.

Whoever you select, be sure they are a good fit for your company, are aware of the laws and guidelines you must abide by, and have no stake in the result. After that, give them a detailed explanation of your compliance audit's goals and the problems you need it to solve.

Prepare for the audit

One of two options is available to you: either you or your auditor created a compliance audit checklist. To make sure you have covered everything, a checklist method can be quite helpful in either case.

Ensure you have all the documents and evidence the auditor needs

For companies with less-than-strong compliance procedures, this can be the first source of contention. One of the most important steps in fulfilling your compliance responsibilities is being able to substantiate the procedures you have in place and the way you adhere to them.
You must keep precise records of your processes for your auditor.

These can be obtained by on-site visits, or they can work remotely, asking for documents to be delivered to them and having phone or video calls to address the issues stated.
The auditor may sit in on organizational meetings and observe current procedures during on-site visits to have a firsthand understanding of your workings.

Compliance audit report

The auditor's conclusions are presented in audit compliance reports, which can be used to assess an organization's compliance environment and offer opportunities for development. Reports on audit compliance might highlight potentially problematic areas that could put the company at risk of fines or legal action.

Whether you're writing the report for an internal or external audience will determine how it is structured. Reports from external audits, such as those issued by regulatory bodies, must demonstrate that the company is doing honestly and is a prime target for correction. Reports from internal audits usually go to the board or senior executives and offer recommendations on how the company should address any potential regulatory or compliance problems.

A successful compliance audit report should include:

  1. Identify the auditors: Give background information about the auditors to demonstrate their legitimacy and level of experience. Readers must understand their qualifications in order to make knowledgeable decisions about compliance actions.
  2. Describe the audit's logistics: Provide a detailed and understandable accounting of the audit process. What procedures or actions, for instance, were looked at? Which rules or checklists were employed as benchmarks? To put it briefly, this is the stage in which auditors set the audit's criteria.
  3. Outline the audit's conclusions: Provide general findings and suggestions based on the objectives and procedures of the audit. It is helpful to discuss the situation in this synopsis, together with the factors that led to success or failure and their consequences, such as lost income.
  4. Make improvement recommendations: It is customary for the report to offer suggestions for improving compliance procedures and specific actions the company can take to cut down on deviations.

How SKMC Global can help ?

As a industry best Compliance Auditor, SKMC Global ensures compliance with industry standards, corporate policies, and regulatory regulations, which is crucial in assisting firms with compliance audits. Their knowledge and impartiality offer insightful information about risky, non-compliant, and improvement-oriented areas. Our experts team providers help carry out and support compliance audits in the following ways:

1) Audit Planning and Preparation

  • Determining, in accordance with legal and regulatory requirements, which areas (such as financial reporting, data protection, environmental regulations, labor laws, etc.) will be audited.
  • Assessing the business's operations to find high-risk areas where non-compliance could happen.
  • helping to collect, arrange, and examine records, policies, and processes to make sure they are prepared for an audit.
  • Establishing precise goals for the audit and making sure it covers important topics like internal controls, company governance & regulatory compliance.

2) Expert Knowledge of Regulations

  • Advising on pertinent laws, including those pertaining to financial compliance (e.g., SOX, IFRS), data privacy (e.g., GDPR, HIPAA), and industry-specific rules (e.g., FDA for pharmaceuticals).
  • Assisting the company in maintaining compliance with changing legal standards and keeping them updated on regulatory developments.
  • Businesses can better align with sectoral requirements by comprehending industry-specific compliance obligations and how they relate to the organization's activities.

3) Conducting the Compliance Audit

  • Assessing how well internal controls—such as automated controls, checks and balances, and reporting systems—are working to maintain compliance.
  • To check if the company is adhering to legal and regulatory standards, sample testing of transactions, operational procedures, and records are conducted.
  • Interacting with important staff members to learn how compliance regulations are applied and adhered to at different organizational levels. examining data to look for any discrepancies or possible violations, making sure that all necessary reports are accurate and submitted.
  • Determining the areas in which the organization's policies, practices, or controls don't meet industry or legal standards.
  • Evaluating the possible consequences of non-compliance, including as fines, harm to one's reputation, or interruptions to business operations.
  • Prioritizing gaps according to their seriousness and possible effects on the company enables management to concentrate on the most important problems first.
  • Assisting companies in updating and changing their compliance procedures to conform to audit results or changes in regulations.
  • Establishing monitoring systems to keep an eye on the application of corrective actions and make sure they are finished within the allotted period.
  • Investors, clients, and partners are reassured by an independent audit that the company conducts business morally and legally.
  • Evaluating audit results and creating long-term plans to maintain compliance. Conducting follow-up audits to make that compliance is maintained and corrective actions have been appropriately implemented.

4) Compliance Monitoring

  • Establishing procedures for routine internal compliance audits, which will enable the business to proactively detect and resolve possible compliance problems.
  • Putting in place software programs that automatically identify possible infractions, track regulatory changes, and monitor compliance.
  • Putting in place systems for continuing observation and real-time reporting to guarantee continued adherence to legal obligations.

5) Training and Awareness Programs

  • Teaching employees about pertinent laws, their responsibilities, and how to follow them.
  • Making certain that staff members are aware of the company's internal regulations and know how to adhere to them in their daily work
  • Teaching staff members how to identify compliance risks and steer clear of behaviors that can result in non-compliance.

6) Technology Integration and Support

  • Tools that offer a consolidated platform for managing compliance initiatives, assist in tracking compliance duties, and preserve documentation.
  • Establishing procedures that guarantee each activity, choice, and transaction has a recorded audit trail is essential for an audit.
  • By including encryption, access controls, and monitoring tools that secure sensitive data, systems can be made to comply with data protection requirements.

7) Regulatory Reporting and Communication

  • Creating official audit reports that identify non-compliance, explain the results, and offer suggestions for improvement.
  • Ensuring that all paperwork pertaining to compliance, including filings, licenses, and certifications, is in order and timely submitted to the appropriate authorities.
  • Assisting management in updating stakeholders, regulators, and board members on audit findings, remedial measures, and compliance status.

With experience, impartiality, and workable solutions, as-a-service providers we at SKMC Global makes it a motto to deliver the success of compliance audits. Our Compliance Auditor team make sure that companies follow the law, reduce risks, and run effectively while staying within the bounds of industry and legal norms. Organizations may enhance internal controls, steer clear of expensive fines & cultivate a compliance culture with their help.

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