Compliance audits are all-inclusive reviews of an organization’s fidelity to regulations and policies. They determine whether a process or business transaction within a firm has followed applicable rules. The different set of rules and regulations pertaining to a particular business can be various. These could include rules created by the organization for itself through corporate bye-laws, plans and procedures: external regulations imposed on the business; specific set of standards that the business chose to follow; etc. Compliance audits are generally performed by authorities within the organization, those who are hired by the organization or auditors working for an external regulatory agency.
Benefits of an Effective Audit Program
The various benefits of conducting an effective compliance audit program are as follows:
- Establishment of policies and regulations within an organization.
- Practising necessary oversight on ethics and moral values.
- Educating employees and staff about transparent compliance programs.
- Excellent monitoring on organizational activities and business procedures.
- Ensuring consistent disciplinary enforcement on operations.
- Active feedback based on current issues and appropriate response to prevent future issues.
Steps for effective Compliance Audit Program
Despite its famed history, companies facing audits and inspections still face a dilemma regarding the process. This can be attributed to numerous reasons involving flaws in fraud identification and risk management process; lack of awareness about internal auditing; faulty inspection, assessment and/or feedback; confrontational approach in the work environment; ineffective time and skills management; lack of proper communication and process analysis skills; etc.
To tackle the above-mentioned issues and to fulfill the goal of an effective audit program, the following steps are necessarily required:
- Select the team – The first step in accomplishing an effective compliance program is selecting the right team for the audit. Understanding the seriousness and importance of the audit, experienced individuals with an eye for detail must be selected. The main inspector chosen to monitor the team and oversee the process must be the most qualified candidate. An audit team should be formed by ingraining the key element of quality which will ensure the presence of integrity, ethics, personality, responsibility etc.
- Schedule the audit process – Once the team is selected, the specific organization in question where the audit is to be conducted should be considered. Divide the company into different parts and lock in a priority order in which these parts should be audited. Highest priority must be given to departments with highest risk of vulnerability. Assigning priorities will make risk assessment a systematic process and integrates problem solving with judgement on a positive note.
- Refer standard policies – When the organization and functioning industry of the target audit process is chosen, the standard policies and regulations pertaining to that specific firm should be taken into account. The best case scenario is that organizational procedures can be obtained and cross-checked with existing regulations. Business statements also should be referred to and evaluated. This will give the audit team a first-hand idea about the compliance program associated with the company.
- Determine time – The next step in the audit preparation process is determining the right timeline. Usually audits tend to disrupt the functioning of an organization and this would create an imbalance in productivity. Certain audit processes are supposed to last for a long time-period mainly owing to strength and spread of the organization. The timeline for an audit should be determined in a way allowing the departments to maintain duties and fulfill responsibilities. A specific time should be allotted to conduct audit thoroughly and the rest should be dedicated to company activities.
- Conduct audit/compliance – The major step in the entire inspection process – the chosen team on the determined time at the specific organization conducts the audit. The primary series of activities include notifying the organization about the process; planning the action with an opening meeting among the team; doing the fieldwork. Fieldwork is the most essential activity among the lot. Active communication has to be established among the team members and regulations concerning the organization must be verified. A planned effective audit process must be finished in due time and then the audit team can move on to the next step.
- Create reports – Creating reports based on completed audit process is the next step. The reports must be authentic and dynamic.A non-confrontational approach has to be followed and strictly correct report should be done. Different sets of assessments collected from individual auditors must be jointly considered to complete a fully fledged report. While creating reports, transparency must be maintained and necessary prioritized report should be generated.
- Review reports: Once the compliance audit report is created, it should be reviewed among the team by holding a meeting. Concerned stakeholders within the organization should also be involved in the meeting. This will give them a chance to speak out their minds about particular topics in the generated report. When the audit report is reviewed and if/when necessary changes are made, final report can be prepared. The main thing to remember here is that the audit process is a collaborative effort.
- Publish reports and recommendations: When the final report is done, the audit team can publish the same. If the organization is not adhering to the standard regulations, action must be taken. However, lighter offenses should be treated as such and required recommendations for change can be discussed. Based on organization’s reactions and comments to the published report, follow-up action must be taken. Grievances should be addressed as well as methods to ensure adherence to future compliance stipulations should be undertaken. A final closing meeting will keep the already built working relationship between all the concerned authorities.
An effective compliance audit process ensures an organization is following regulations and avoiding sanctions. This article has tried to achieve just that by explaining steps to develop and enact an efficient audit process. When a business process accomplishes structural risk management program, it will help the business deal with the compliance issues as well as helps with efficient monitoring on the part of the concerned authorities. In conclusion, the benefits of managing an effective audit program is visibly profitable to an organization and gives it much needed transparency and reputation.
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