A compliance audit is a review performed to ascertain an enterprise’s adherence to regulatory guidelines. Audit reports evaluate the strength and comprehensiveness of an organization’s compliance preparations, security policies, user access controls, and risk management procedures.
There are many types of compliance audits, including technical, financial, operational, and cybersecurity audits.
Common compliance audits include:
- HIPAA (Health Insurance Portability and Accountability Act of 1996)
- PCI-DSS (Payment Card Industry Data Security Standard)
- SOC 2 (system and organization controls, a data security audit specifically designed for service providers that store customer data in the cloud)
- SOX (Sarbanes-Oxley Act of 2002) compliance audits (auditing and financial regulations for public companies)
A company’s employees, such as an internal auditor, may perform internal audits to identify the overall risks to compliance and security. They also can determine if the company is following internal controls and guidelines, such as corporate bylaws, policies and procedures.
Company executives can use the reports generated by these internal audits, which are performed throughout the fiscal year, to detect shortcomings in their regulatory compliance processes and determine areas that require improvement or corrective action.
External audits, on the other hand, are formal compliance audits performed 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 gauge whether an enterprise complies with federal, state, or corporate regulations and standards. Certified public accountants are often the compliance auditors.
Regulators use an auditor’s report to assess possible fines for noncompliance.
Executives use them to prove that their organizations are complying with regulations.
The information gleaned from compliance auditing may also help organizations reduce risk, as well as avoid possible federal fines or legal problems associated with non-compliance.