Compliance Audit Boards

What Is a Compliance Audit?

Compliance audits are formal evaluations or assessments of an organization’s adherence to frameworks and/or regulatory requirements. 

Compliance audits are conducted by independent audit practitioners, and most have the following characteristics:

• Based on frameworks or regulatory requirements.
• Evaluates an organization’s posture in-depth based on the guidance and requirements of the target framework or compliance regulation.
• Performed by an independent or third-party auditor.
• Results are in some kind of final deliverable, like a report, an assessment, or an audit opinion.

During a compliance audit, businesses should expect to go through interviews about internal controls. You will likely be asked to provide documents or evidence to show that you’re “walking the talk” in carrying out compliance requirements. Auditors must meet their standards, exercising their judgment and professional skepticism to reach “reasonable assurance” that an organization is conducting the activities stipulated by the target framework or regulation.

Purpose and Objectives of a Compliance Audit

Ultimately, the purpose of a compliance audit is to receive a deliverable detailing the organization’s degree of compliance against the target framework or regulatory agency requirements. 

Depending on the type of compliance audit, an organization might receive an audit opinion, as with SOX and SOC audits. Audit opinions are issued over the efficacy of an organization’s internal controls as they relate to specific criteria. Successful ISO 27001 audits result in a certification. Not all compliance audits are pass or fail; regardless, noncompliance can have less-than-ideal consequences.

Since compliance audits are performed by third-party, independent auditors, these formal audits are objective, and will often include areas of improvement for the business. Perhaps more poignantly, third-party compliance audits build trust with external organizations and customers, demonstrating that an organization has the necessary controls in place to meet target requirements.

While most companies are compelled to complete compliance audits because of regulatory agency requirements or contractual demands, clients should approach compliance audits as a multi-faceted tool. In addition to “checking the box” of completing mandatory audits, companies can and should use any findings as an opportunity for improvement, remediating any gaps discovered through the audit process. If corrective action is not possible in the short term, it’s a good idea to log gaps in your risk register and keep track of remediation status. Demonstrating commitment to continuous improvement mitigates present and future risks.

As third-party risks continue to pose a threat to global cybersecurity, businesses, and direct consumers expect more in terms of security, data protection, and privacy from organizations, making SOC 2 attestations and ISO 27001 certifications in demand, perhaps even table stakes for sales discussions. Privacy regulations like GDPR have galvanized other geographies into implementing privacy regulations around personal data, or at least starting the conversation. The Payment Card Industry Security Standards Council (PCI SSC) which governs PCI DSS has released PCI DSS v.4.0 in December of 2022 and plans to sunset PCI DSS v.3.2.1 by 2024 — this change will drive changes to the PCI DSS compliance audit approach.

Audit deliverables may also include recommendations for management and strategy. This third-party advice can help make the case for additional focus on governance, risk, and compliance (GRC) or security.