Compliance Auditing Strategies: An Internal Auditor’s Perspective

Compliance Auditing Strategies: An Internal Auditor’s Perspective

Abby Dawson

Compliance Auditor

Nov 2, 2023

In a dynamic business environment, risks can emerge from unexpected corners. As an Internal Auditor, I assess the organization’s adherence to these standards, highlighting areas that require corrective action. My journey as an Auditor is riddled with challenges that demand keen attention, adaptability, and a methodical approach. This article will discuss how technical compliance alone is insufficient, explore some real-life auditing pitfalls, and offer practical strategies to mitigate the consequences.

Technical Compliance: Beyond the Basics

Organizations strive to ensure technical compliance, meaning their products or system operates efficiently, effectively, and safely. It is essential to maintaining security and privacy, which involves data encryption, network configurations, security protocols, and hardware or software compatibility. Organizations also seek to align with specific regulations, industry standards, best practices, and internal policies. Merely meeting minimum technical criteria may only account for some potential risks. Noncompliance can lead to regulatory or legal action, resulting in penalties and fines, loss of potential future earnings, and damage to the organization’s reputation. Technical compliance alone does not guarantee that organizations meet all requirements, standards, and regulations.

Operational Compliance: Bridging the Gap

By supplementing with operational compliance, focus adheres to active policies, procedures, and regulations in the broader context of a business. It encompasses a wide range of obligations, including best practices in day-to-day operations, legal requirements, human resources, finance, quality management, and health and safety. Operational compliance helps build trust, credibility, and positive relationships with employees, customers, and stakeholders by conducting operations in a fair, responsible, and ethical manner. Compliance can also improve quality management, operational controls, and employee training, enhancing productivity and streamlining processes. Demonstrating operational compliance can improve and protect the brand’s reputation and differentiate it from competitors, contributing to customer loyalty and attracting new business opportunities.

Navigating Risk with Compliance

Compliance with laws and regulations is mandatory for businesses to minimize the risk of legal consequences, fines, or criminal charges. Violations can lead to significant financial loss and potential litigation. While technical compliance provides a baseline level of security and control, organizations must consider broader risk management strategies.

Operational compliance programs often involve risk assessments and controls to effectively identify and mitigate potential risks. This involves identifying and assessing risks, implementing controls, and continuously monitoring and adapting to new threats or vulnerabilities. Adhering to operational compliance standards helps mitigate risks associated with fraud, data breaches, security breaches, money laundering, and other illegal activities. It establishes protocols and safeguards to protect sensitive information, financial assets, and intellectual property.

Compliance auditing is a critical process of ensuring technical and operational compliance. Even so, organizations should be aware of the potential pitfalls of auditing and the strategies to mitigate the consequences. Compliance audits typically focus on specific areas of regulations or policies, which may result in overlooking other important aspects. This limited scope can create blind spots and leave room for non-compliance in other areas. It is important to foster a questioning mindset to identify potential areas of risk or fraud and learn to provide insightful recommendations for process improvements by developing critical thinking to analyze information.

Pitfalls in Compliance Auditing

Challenges with interpretation result from complex requirements where auditors may have different understandings of the regulations. This can lead to inconsistent findings and recommendations, causing uncertainty and confusion. Improving communication between the audit team and clients helps build relationships, resolve issues, and deliver audit findings comprehensively.

Strengthening Compliance Culture

Auditors may struggle to keep up with frequent changes in laws, regulations, and compliance requirements. This results in outdated audit practices and the potential of missing new compliance obligations. As auditors, we need to prioritize enhancing our technical knowledge. We must stay current with the latest auditing standards, regulations, and best practices. This includes regularly reading professional publications and attending relevant training sessions or webinars. Strengthening our technical expertise enables auditors to understand complex situations better and effectively assess risks.

In today’s complex regulatory environment, navigating the pitfalls of auditing requires combining technical expertise, effective communication with teammates and regulators, and a commitment to maintaining objectivity to foster a strong compliance culture throughout the organization. From the vantage point of an internal auditor, technical and operational compliance form the bedrock of a resilient and responsible organization.