Compliance audits (Also see Types of Audit – Compliance Audit) refer to the formal reviews to identify whether an organisation is operating in compliance with the contractual agreement. Typically, a government regulatory agency, third-party organisation, or an independent audit firm in Johor Bahru will perform such an audit. The compliance audits pay more attention to the operations of a business. In contrast, the financial statement audits (Also see Essential Processes in the Audit of Financial Statements) focus on reviewing whether the company adhere to the related accounting standards or other financial regulations.
Internal Management
The auditors will start a compliance audit with interviewing the management of the company. The individuals who are involved in this process include the operational managers, directors, as well as the business owners (Also see Characteristics of Successful Business Owners). By interviewing them, the auditors will know to what extent the managers or the owners understand the terms and conditions of the contractual agreement. Besides, the business owners might experience a process of reviewing the contracts, which means that the auditors will go through their contractual agreement and review it. Typically, the auditors will create their audit plan by using this meeting. The plan includes certain areas that the auditors will assess or review the company’s processes against its contractual agreement.
Performance of the Employees
The auditors might interview some of the employees to find out their levels of understanding towards their responsibilities to the contractual agreement of the company. Usually, the auditors will perform this process without the presence of manager so that they can obtain honest opinions from the employees without being influenced by their superior. Once the auditors finish interviewing the employees, they may observe them when they are performing their daily tasks. They will examine whether the employees complete the company’s business functions in compliance with the contractual agreement and standard operating procedures (SOP) (Also see What are the Audit Procedures and Its Objective?) of the company.
Reviewing the Processes
To identify whether the company comply with the contractual agreement, the auditors will review its business processes. Usually, they will identify how well it completes its functions as well as determine whether there is any compliance violation in its systems. Violations may include undermining government regulations, wasting economic resources, producing products with low quality, as well as ignoring safety concerns. Typically, the auditors will consider the violations that take place and try to identify how widespread those violations can be in the operations of the company.
Final Analysis
Once the compliance auditors have finished performing the compliance audit, they will have a final wrap-up meeting with the management of the company. This meeting enables the managers of the company to review the auditor’s report before they release this information to the public. Besides, the auditors will give some suggestions to the company so that it may correct the violations or other errors in its processes. This meeting may also include third-party organisations so that they know how well the company is complying with its contractual agreements. When the compliance audit comes to an end, the auditors will issue the official report so that all parties that involve in the agreement and the public can review it.
