Executing a legal compliance audit with a carefully developed compliance audit checklist is an essential way to stay compliant with the law and to maintain the company's mission. Just some of the positive outcomes from maintaining regular compliance audits include:
- A safe and stress-free work environment for the employees
- Increased employee productivity
- Avoidance of compliance fines
- Avoidance of disruptions or shut-downs of the enterprise's operations
- Ensuring a good reputation for the business
Before we get into how to our compliance audit checklist, let's talk about what compliance audits are.
Defining A Compliance Audit
- Whether the business is a public or a private company
- Which industry sector the business operates in (healthcare, education, hospitality, etc.)
- The types of occupational roles employed within the company (programmers, construction workers, nurses, etc.)
- Laws and regulations local to the business
- Whether or not the company retains its clients' private information
- Whether or not the company has international clients/customers
What Is The Point Of Compliance Audits?
- Risk identification
- Risk prevention
- Risk monitoring
- Risk resolution
- Risk advising
Types of Compliance Audits
- Being compliant with labor laws. Arguably the most intensely scrutinized area of compliance is the protection of the rights of the workers. The Department of Labor performs regular audits of organizations to verify their obedience to the corresponding rules and regulations.
- Being compliant with health and safety / environmental protections. Failing to comply with safety regulations carries a lot of financial liability in the form of legal fees, payouts to the victims, and fines from government entities such as the Occupational Safety & Health Administration or OSHA violations
- Being compliant with corporate governance rules. Sustainability, accountability, and transparency are all qualities every company owes to the government and to its own investors. A compliance audit into corporate governance probes the financial and governing decisions and policies of the executive employees of a business.
- Being compliant with data security requirements. A business that retains sensitive customer data is legally responsible for its protection from leaks and abuse. A compliance audit would evaluate whether or not a company uses proper, updated communication software and hardware with the latest password protection and takes other measures to keep the information confidential and from being misused.
What Is A Compliance Checklist?
Audit Checklists For Different Legal Areas:
- Labor Laws. This compliance checklist must enforce a detailed query into the enterprise's HR management practices, collective bargaining, employee relations, equality / anti-discrimination policies, etc.
- Health / Safety / Environmental. Depending on the specifics of the business, the compliance checklist is used to inspect for dangers to human and environmental health, with attention given to items and practices that constitute a "hazard" as well as preventative practices such as fire safety and emergency response training of employees, access to proper and safe work equipment and other legal housekeeping necessities.
- Corporate Governance. A legal compliance checklist for this aspect of corporate operations probes into the inner workings of how an organization is run, combing through corporate policies, registration paperwork, appointments and elections of executives and organizational officers, relevant financial documents, the corporation's performance of civic responsibilities, etc.
- Data Security. A compliance audit checklist for this category is focused on making sure that the company adheres to the strictest measures of privacy for their client data (through access control, updated encryption software, etc.)
Internal (HR) and External (Regulatory) Compliance Requirements
External (Regulatory) Compliance Requirements
Internal Compliance Requirements
Is A Compliance Audit Necessary For Every Company?
Consequences For Being Non-Compliant
The Phases And Steps For Conducting An Internal Compliance Audit
The Preparation Phase
- Notification. Notifying the organization being audited (the auditee) and providing a discussion of the scope, goals, and framework of the upcoming investigation.
- Team Selection. Assembling a team of most experienced and detail-oriented employees to conduct the compliance audit, with one person assigned the role of an auditor. Appoint the most qualified member to supervise the team.
- Gathering Of Documents. A thorough review of all relevant audit documentation provides a better understanding of the upcoming compliance audit processes. Request and assemble copies of departmental procedures for each part of the compliance audit and cross-check them against the latest regulations to rule out (or catch) apparent violations. Break down the separate parts of the business to audit: begin with a review of the aspects subject to most regulations and at the highest risk for violating those regulations.
- Setting A Timeline. Create an efficient timetable of the audit from beginning to end (and stick to it).
- Creating A Practical Audit Plan, If Required. Determine the type and scope of the review. If the audit requires a review of a large volume of documents or personnel that must be scaled down, make sure to determine the correct size of the audit -- one that makes for a representative sample of the features/people/numbers surveyed. Invest into developing probing employee questionnaires.
- Developing A Legal Compliance Audit Checklist. Create a legal compliance checklist to be implemented in the next phase of the audit.
The Performance Phase
- Having An Opening Meeting. Before launching the audit, the team should meet with the lead auditor to discuss primary objectives and agree on the overall expectations of the effort.
- Performing The Audit. The audit is conducted relying on the previously developed compliance audit checklist.
- Having An Audit Team Meeting. The results and findings of the audit are discussed and solutions to the exposed problems are suggested by team members. Measures are recommended for achieving complete compliance with legal requirements and best industry practices. Improvements to the existing legal compliance checklist may be suggested for future audits.
- Meeting For The Closing Of The Audit. An attendance list is put together, followed by a discussion of key topics and questions related to the audit. The audit summary is presented, followed by the thanking of the auditor for their help and cooperation.
The Audit Reporting Phase
The Follow-Up Phase
Legal Compliance Audit Checklist Example: HR Compliance
- Break down and evaluate the company's recruiting/interviewing/hiring employees. Pay particular attention to potential discriminatory practices on the basis of disability, skin color, ethnicity, religion and gender, holding onto and archiving onboarding documents that trace all the processes related to hiring.
- Institute / re-evaluate the Affirmative Action Plan. Businesses with 50+ employees and US government contracts for $50,000+ are legally required to institute the Affirmative Action Plan: a diversity plan meant to include racial minorities, women, employees with disabilities, and US military veterans into fair hiring and workplace training practices (EasyLlama's diversity and inclusion training makes it easy and simple to stay compliant with the Affirmative Action Plan).
- Maintain stellar employer record-keeping. Keep records of all employee-signed paperwork, including employment agreements. Also, make sure to develop and furnish the employee handbook to all workers.
- Create and maintain health (and drug testing) records confidentiality. (If this is a concern, consider taking EasyLlama's HIPAA compliance training course.)
- Adhere to Equal Employment Opportunity Commission laws. Paying strict attention to EEOC regulations is the way to avoid discrimination complaints at the workplace.
- Train staff and supervisors to get compliant with sexual harassment regulations. (Check your state's sexual harassment laws and compliance requirements with EasyLlama's free guide.)
- Practice best techniques for developing and implementing human resources policies. (For example: institute a reasonable policy on ways employees may and may not use social media/networking sites while at work.)
- Be compliant with employee benefits and payroll rules. Review existing benefits offered to employees to make sure they are in compliance with the law; consider adding voluntary benefits like dental, vision, rehabilitation services, retirement accounts, and life insurance -- to stay competitive (and be considered a good company to work for).
Stay Ahead Of The Audit Compliance Game By Creating Your Own Legal Compliance Checklist
- Do the due diligence and thoroughly research and become familiar with all the compliance requirements that apply (and keep updated on new legislation developments)
- On the basis of that research, develop a compliance audit checklist and perform a self-audit to stay ahead of potential problems