Audit and compliance go hand in hand, but they are not the same. Compliance encompasses all policies and procedures created for a company to comply with laws, regulations, and standards (both external and internal).
On the other hand, auditing is verifying whether all of this is functioning correctly. Thus, it helps identify irregularities and areas for improvement.
This duo promotes integrity, agility, and efficiency across processes and areas that must adhere to rigorous quality guidelines.
However, many corporations still struggle to implement a productive compliance and auditing policy despite their importance.
Learn how to avoid this from happening to you and get all your questions answered on the subject!
See also: Free eBook – How to Prepare for Audits
What is compliance?
First, let’s remind ourselves what compliance is and delve deeper into how this practice is usually present within companies.
The list of items that are part of a compliance policy is extensive. Some examples include:
- Quality control;
- Employee training;
- Establishment and provision of reporting channels;
- Implementation of incident response and prevention processes.
The key is to understand that this policy encompasses all practices and procedures that ensure compliance with legal, regulatory, ethical, and internal standards related to a company’s activities.
How compliance can help your company
Auditing and compliance working together have the potential not only to ensure quality and compliance within a company but also to anticipate external threats and identify opportunities for growth/improvement.
A compliance program allows you to map weaknesses and prevent failures that could harm not only production itself but also a company’s reputation and even the well-being of its clients.
Moreover, this practice facilitates the easy updating of practices, processes, and routines to align with new standards and regulations that emerge daily.
Staying updated with the market and even anticipating needs and changes is a significant challenge that becomes easier with a compliance policy.
This will be increasingly vital for companies aiming to stand out in the market. According to a KPMG study, sectors in compliance and auditing need to pay attention to factors such as macroeconomics, geopolitics, and even technology.
For example, the study notes that 80% of interviewed companies consider artificial intelligence a challenge for cybersecurity, and 48% feel less confident in their ability to assess cyber risks.
Therefore, if your company not only wants to avoid failures (and their respective legal consequences) but also aims to gain efficiency and surpass the competition, it needs to focus on compliance.
5 steps to start a good compliance policy
But, in practice, how does this compliance business work? Well, it all depends on the type of company you work for and the specifics of the industry it operates in.
A financial services company will have a set of guidelines and regulations, whereas a pharmaceutical company will need to adhere to different health regulations.
In other words, each company needs to develop a compliance program according to these needs and adopt practices and controls that ensure compliance with them.
However, there are general best practices that can assist you in creating a compliance and auditing policy.
Check out five of the main ones below!
1 – Codes and conduct policies
The first step in defining a good compliance policy is to create a code of conduct. It needs to contain all the rules and guidelines that employees must follow.
Remember that these guidelines need to be related to ethical, legal, and compliance aspects of your company’s operations across all areas and teams.
The result will be a comprehensive policy document — and just as important.
2 – Training and education programs
After creating the code of conduct, it’s time to put it into practice. The first step in doing so is to ensure that the norms are known by all and, moreover, that people know what, how, and when to apply them.
To achieve this, create training sessions, qualifications, and workshops involving not only quality control, auditing, and compliance teams but also all other areas.
Also, keep an eye on news and revisions to regulations and laws relevant to your company, updating both conduct policies and training when necessary.
3 – Internal auditing, monitoring, and control
Now that the guidelines have been established and the entire team trained, it’s time to relax, right? Wrong!
It’s essential to ensure that what was established in the policies and taught in the training sessions is being applied and that all this material is up-to-date and relevant.
For this reason, conduct regular reviews to evaluate the effectiveness of compliance policies and thus identify areas that need improvement or updating.
Also, have an efficient change control mechanism that is easy to access and secure to catalog all of this.
Auditing plays a part in this, ensuring the compliance of everything (but you’ll see more about this shortly).
Another good practice is to use mechanisms that monitor and verify the conformity of documents, actions, contracts, among others, with the established policies.
A golden tip for those seeking to save time, gain efficiency, and save money is to use compliance and quality control software.
This way, you automate various activities and still have quick access to documents and reports, among other resources.
4 – Reporting channels
No matter how much effort is made to ensure that everything runs smoothly and that rules and guidelines are always respected, errors and violations are likely to occur.
Therefore, your compliance program must have reporting channels so that employees, suppliers, and other stakeholders can report these occurrences.
Ensure that these channels are confidential, secure, and easily accessible to those who need them.
5 – Investigation and resolution of irregularities
Finally, it’s worth noting that having reporting channels is pointless if you don’t take action on what is reported.
Establish procedures to investigate and, if necessary, address compliance violations.
Include in these procedures the details and people/departments involved, as well as their respective investigations and appropriate corrective actions.
A good practice for this process is to involve controllership, compliance, and auditing to maximize efficiency and avoid biases.
Download the Free eBook: 10 essential lessons for a successful compliance program
Compliance indicators
To measure whether all this effort is paying off and what level of success (or failure) you’re achieving, there are compliance indicators. They can be quantitative or qualitative, although it’s recommended to choose a mix of both.
They function like any other Key Performance Indicators (KPIs) in your company: they are results that indicate performance, but in this case, related to compliance policy.
Remember that, like the compliance program itself, indicators also vary from company to company, as they take into account the specificities of the business.
A tip to help you choose them is to think of metrics that help understand whether what you defined in the compliance policy makes sense and whether it is being well applied.
In general, anything that can show the level of promotion of compliance with laws, regulations, internal policies, and ethical standards can be an indicator.
Some of the most common compliance indicators are:
1 – Adherence to policies and training
The goal in this case is to measure how much employees comply with the policies and norms defined in the compliance system.
To make this assessment more concrete, you can look at the percentage of people who completed training, the average scores on tests related to these training sessions, and the rate of use of reporting channels, among other data.
2 – Number of complaints and incidents of non-compliance
This is probably the most used compliance indicator. After all, the quantity of complaints and confirmed incidents is linked to how well people understand and follow compliance policies.
3 – Time and rate of incident resolution
Other widely used and valuable metrics. Analyzing the incident resolution rate helps you understand whether the entire compliance structure can handle the volume of reported cases. This applies to both employees and processes/tools.
Similarly, the time taken to resolve cases also indicates whether, despite being able to resolve incidents, this is happening within an acceptable timeframe or whether it’s something that needs improvement to mitigate negative impacts.
4 – Reputation and external assessment
Finally, a compliance indicator with a more qualitative character. It’s increasingly common to evaluate the external perception of the company regarding its commitment to compliance and ethics.
To measure this, you can conduct reputation surveys and collect feedback from customers and suppliers, for example.
The goal is to understand if your company is seen as a brand that cares about compliance and how this can be more effectively communicated externally.
What’s the difference between compliance and internal auditing?
As you’ve seen, compliance encompasses all guidelines, activities, result indicators, and norms that seek to ensure compliance, whether according to internal standards, external norms (such as ISO 27001), or both.
Auditing, although usually working in conjunction with compliance, is slightly different. It’s not responsible for creating guidelines and norms but for assessing their quality and effectiveness.
In other words, a company first creates its compliance policy, then audits (which can be internal or conducted by external bodies) are performed to analyze and evaluate this policy and its outcomes.
The main goal is to discover whether a company’s activities, documentation, products, and other processes comply with applicable laws and guidelines.
3 benefits of conducting an audit
The combination of auditing and compliance has the ability not only to prevent problems but also to enhance a company’s good practices.
The benefits of this practice vary according to the definitions established in the compliance system of each corporation, as well as the activities carried out and the norms to be followed.
It’s also worth noting that the more thorough and specific your compliance policy and audits are, the greater the positive impact on your company.
Below, you’ll find three of the main reasons to conduct a compliance audit in your company.
1 – Identifying risks, flaws, and opportunities for improvement
This is probably the main reason why a company has auditing and compliance working together.
By analyzing established practices and norms, it’s possible to identify errors, anticipate failures, and even improve what is already being done well.
Therefore, it’s crucial to have mechanisms that analyze and assess internal controls, operational processes, and management systems used for compliance within your company.
This way, you can understand how efficient and secure they are, as well as how much they’re meeting their goals.
2 – Safeguarding the company’s image and reputation
We know that one of the main consequences of failing to comply with the standards set by the market, legislation, and norms is reputation damage.
By meeting compliance policies, you protect your company’s image and reputation by ensuring its responsibility and respect for laws and standards.
An audit is an opportunity to check if your company is indeed following all the rules, resolving cases of non-compliance quickly and properly.
In this way, it’s possible to prevent issues from arising that may harm your brand, clients, and suppliers, in addition to the company’s daily operations.
3 – Increasing efficiency and optimizing costs
A company that follows a good compliance policy and conducts audits regularly has a more efficient and optimized operation.
This is because the company invests in well-prepared teams and systems, which avoids non-compliance issues and ensures the organization’s functioning.
Moreover, the resolution of cases and errors in compliance helps reduce costs, whether with disputes or even with the development of penalties and the provision of quality.
Therefore, investing in an effective compliance policy and making auditing a routine can bring long-term gains.
It is important to emphasize that the use of systems and software for compliance, audits, and internal control can assist the company’s management in making the decision.
Types of Audits
Audits can be classified based on the institution conducting them.
They can be internal when performed by the company itself, or external when conducted by another specialized company.
An internal audit focuses on evaluating compliance with policies and regulations defined by the company.
On the other hand, external audits may involve assessments related to standards and guidelines from specific regulatory bodies, such as an ISO audit.
In addition to these two forms, audits can also be classified according to the area/team being audited.
In this sense, as you can imagine, there is a wide variety of audits. Some of the most common ones include:
- Quality Audit – Evaluates operational processes related to control and management. The goal is to ensure that all products/services produced by the company adhere to established quality standards.
- Management Audit – Focuses on reviewing management practices, such as policies, strategies, and procedures. This type of audit assesses whether everything is aligned with the company’s strategic objectives and applied efficiently.
- Financial Audit – Reviews and verifies financial records and procedures of the company’s financial assets. This ensures the reliability and integrity of financial transactions and records.
- Systems Audit – Focuses on cybersecurity, assessing the integrity and confidentiality of the company’s IT structure, systems, and software used.
The Best Solution for Conducting Audits and Compliance Efficiently and Easily
Now you know everything about audits and compliance, but perhaps you have an important question: how can you do all this more simply and efficiently without compromising security?
The good news is that technology can be your great ally in this task. With a quality management system, you can automate a series of tasks, digitize processes, and easily update your policies, guidelines, and controls.
With Software Expert’s solution, for example, you can:
- Manage documents;
- Handle changes and the impact of norms and regulations;
- Assign regulatory requirements and business processes and areas to their respective standards;
- Connect Audits, Risks, Controls, Processes, Documents, and other platform components.
And to see more tips on how to conduct a successful audit, just click here to download the free ebook “Auditing in Practice“.
