Compliance Audit Checklist

Regulatory penalties and fines are no laughing matter for corporate management. In the global marketplace, companies that have international operations establish sound compliance policies to prevent losses that may result from adverse government initiatives. Audit checklists are integral to corporate compliance procedures. These checklists help senior leadership ensure that employees conform to laws when assuming their responsibilities.

Regulatory penalties and fines are no laughing matter for corporate management. In the global marketplace, companies that have international operations establish sound compliance policies to prevent losses that may result from adverse government initiatives. Audit checklists are integral to corporate compliance procedures. These checklists help senior leadership ensure that employees conform to laws when assuming their responsibilities.

Definition

An audit is an in-depth examination of a company's financial records, internal controls and human resources policies. Compliance audits focus on procedures a company puts into place to run a law-abiding business. Compliance auditors generally draw up checklists based on regulatory guidelines. For example, the checklist of a compliance audit focusing on U.S. Securities and Exchange Commission rules indicates items relating to SEC guidelines.

Significance

Checklists enable compliance auditors, especially junior auditors, to perform tasks adeptly and in accordance with regulatory norms. These checklists include SEC directives and generally accepted auditing standards. Having a clear, itemized list of tasks to perform reduces the risk that auditors may miss an important operating process when executing tests.

Operating Environment

Analyzing a company's operating environment is an important item on a compliance review checklist. Compliance auditors review the firm's operating environment to gain familiarity with corporate processes, including administrative and production-related work streams. Using state-of-the-art technological tools, auditors ensure that top management's ethical guidelines are in line with regulations. For example, an auditor verifying compliance with OSHA rules may focus on security policies for employees interacting with hazardous materials, also known as hazmat. The U.S. Occupational Safety and Health Administration requires that companies establish appropriate safety measures for hazmat personnel.

Segment Controls

Segment controls enable auditors to ensure that a firm's internal policies adhere to regulations. A control is a set of rules that a segment chief draws up to prevent losses that may originate from adverse regulatory initiatives, such as fines and penalties. For example, a company listed on the New York Stock Exchange must establish rules to conform to NYSE ethical and financial-reporting guidelines.

External Factors

External factors constitute an essential item on a compliance audit checklist. Auditors review economic conditions and industry practices to understand whether compliance efforts are the order of the day or mere exceptions in the sector. This is because corporate managers may be more likely to establish conformity programs if competitors are following suit.

References

About the Author

Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.