What is a Compliance Audit and its Checklist?

What is a Compliance Audit and its Checklist?

What is Compliance Audit?

Audit Compliance is defined as a formal review which is used to determine whether or not a company is performing its operations in accordance with a contract agreement. Audit compliance is usually implemented by a public accounting firm, a third-party organization or a government regulatory agency. These audits usually focus on the operations of a company or a business, while financial audits review the company’s compliance with the financial regulations such as the national accounting standards.

Compliance audit checklist enables compliance auditors and junior auditors to perform tasks adeptly and in accordance with the regulatory norms. These checklists include SEC directives and generally accepted auditing standards. Having a clear, itemized compliance audit checklist reduces the risk of auditors missing an important operating process when executing or performing tests. That is how significant compliance audit checklist is.

Compliance Audit Checklist

  • Internal Management

The first process in audit compliance is interviewing the management company. This includes business owners, directors and operational managers during the interview. The auditors will then use these interviews to know how well each owner or manager understands the terms of their contractual agreement. The business owners may undergo a contract review process, where auditors check through the whole contractual agreement to review all its aspects. This meeting’s purpose is to use this to create an audit plan. The audit plan consists of specific areas in the company where auditors will review the business processes against the contractual agreement.

  • Performance of the employees

Second on this checklist is the employee performance. The auditors will interview employees to know how well they understand their purpose and responsibility to the contractual agreement of the company. These interviews don’t involve the manager in the process – this is because the auditors want to receive honest answers from the employees. Involving a superior in the interview may influence the employee’s answers, thus making the interview inaccurate and ineffective. After these series of interviews, the auditors can already observe the employee doing and completing their usual job function. The auditors will then assess if the employee completes business functions according to the company’s standard operating procedures and contractual agreement.

  • Process Review

Here, the auditors will review the company’s individual business processes to determine whether or not they are in compliance with contractual agreements. The auditors will measure how well the company performs their functions and if there are compliance violations present in the company system. The violations can include low-quality products, wasting economic resources and billing clients, safety concerns or not complying to government regulations. If present, the auditors will note all violations and attempt to determine how serious the violations in the company’s processes.

  • External Factors

External factors are also an essential item on a compliance audit checklist.  The auditors will review the company’s economic conditions and the company’s practices to understand whether compliance efforts are followed or just mere exceptions in the industry. This is done because corporate managers may be more likely to establish conformity programs if competitors are doing it too.

Objectives of Compliance Audit

Compliance audits are used to achieve the following objectives:

  • maintaining the integrity of the regulatory system administered by DEC, ie, legislation, licenses, notices, consents.
  • ensuring credible and robust regulation.
  • improving compliance with legislative requirements.
  • through public audit reporting, ensuring DEC’s regulatory activity is open and transparent.
  • ensuring that statutory instruments are robust and are appropriately used to achieve the desired environmental and conservation outcomes.
  • environmental and conservation regulation across NSW is consistent and transparent.

Knowledge and skills needed by Auditors

In a compliance audit, auditors should have the necessary knowledge and skills to apply the audit principles, procedures, and techniques when performing compliance audits in companies. DEC has its own internal environmental auditor training program. A DEC officer who has undergone training and has demonstrated that they have the needed qualities and competencies to perform a compliance audit is eligible for certification as a ‘Provisional Environmental Auditor’ with RABQSA International. The auditors will then have the knowledge and competency to perform compliance audits in accordance with this handbook and any other internal work procedures. The DEC staff conducting compliance audits must act ethically, be objective and no bias, versatile, open-minded and decisive. Having a competent auditor is crucial to every compliance audit since they will be ones who will check the performance of companies.

Benefits of Compliance Audit

  • Through Compliance Audit, the management will quickly identify the issues of the company that needs to be addressed. Instead of spending time on Benchmarking, compliance audit plus self-assessments is better in solving the concerns of the company.  
  • Having a compliance audit program performed each year will enable the management to identify and manage program priorities, learn potential weakness and develop a consistent process.
  • Another benefit is those relevant findings can be addressed immediately. Compliance reviews can be focused on specific geographic operations or functions such as the third party due diligence and contracting.
  • Compliance program audits also provide important metrics that can be used as a basis to report it to the company’s management. The management can also learn valuable information by comparing audit data from one year to another. This information, in turn, provides relevant data for assessing the compliance program.
  • With a compliance audit, the company will produce more effective strategies to improve their company. Knowing the errors is an effective way to improve and knowing all the things that needed to be avoided.

Some tips to Pass Compliance Audits

  1. Perform a Self-Compliance Audit
  2. Identify Users Accessing Shared Credentials
  3. Ensure You Have a Compliance Audit Trail
  4. Monitor Activity of Privileged Users, Business Users & Vendors
  5. Stay Tuned to Security Events within Your Industry
  6. Watch Out for New Regulations
  7. Train All Users on Security Policies
  8. Be Prepared to Quickly Produce Documentation

A compliance audit is necessary for all types of businesses or companies. Adhering to the requirements will definitely help you pass compliance audit and a less hassle management of your business.

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