Companies use compliance audits to ensure their internal business functions and processes meet internal or external guidelines. These audits help companies improve their operation’s effectiveness and efficiency in the business environment. Many companies conduct compliance audits on a periodic basis to ensure their operations do not get too far out of line. Public companies may face these audits to remain current with external standards and guidelines found in the local or national business environment.
Compliance audits ensure a company meets the guidelines from government regulatory agencies. Governments often require companies to meet specific guidelines to ensure products are safe for consumers, employees are not subject to harsh working conditions and that the company does not engage in relationships that restrict competition in the economic market. Government agencies also require compliance audits to ensure companies follow all laws in their business industry or sector. Certain business industries—such as energy, pharmaceutical and food—may require more compliance audits than other industries.
Companies can use internal compliance audits to ensure each division or department in the company follows standard operating procedures. Large organizations use these audits to ensure a specific level of quality from business operations. Business owners and managers can use accountants or operational managers to conduct the compliance audit. Conducting internal audits also provides owners and managers with information on where to improve and correct issues in the company. Making improvement to operations can help a company maintain its competitive advantage in the business environment.
Third-party organizations may require companies to undergo compliance audits. Companies may have certifications or endorsements for these organizations that indicate the company is a leader in its specific business industry. Compliance audits ensure the company is not conducting business operations that will undermine the standards of the third-party organization. Companies may also receive financial benefits—such as a reduction in insurance policies—by maintaining a third-party certification. Failing a compliance audit can strip the company of certifications and increase its operating costs.