What is compliance auditing? 

Compliance auditing is a crucial process for any business that operates in a regulated industry, or any company that’s keen to maintain ethical and socially responsible practices. So what is compliance and auditing? And how can blockchain technology help make these audits more streamlined, efficient, and cost effective?
Terry Leonard
Terry Leonard
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The complete guide to compliance auditing

A compliance audit is a comprehensive and formal review of an organisation’s adherence to the rules, regs, standards, laws, and policies that best represent its industry. And in a fair few cases if you don’t meet these guidelines there could be official penalties. 

Basically it evaluates whether a company is doing what it should be doing within the laws and policies that govern it. And the types of audits that your business needs to get, depends on which country you’re in and which industry you operate in. 

In this blog, we’ll be digging into the most common types of compliance audits, so you can understand which ones might affect you.

What’s the difference between audit and compliance?

Audits and compliance assessments both provide assurance that a business is operating effectively.

In layman’s terms, Compliance is what your company does to follow specific legal and regulatory requirements. Corporate compliance also often incorporates an organisation’s own internal codes of conduct (so how staff are expected to behave). It’s about where your business is going and what it needs to do to achieve its goals in a compliant way. 

An audit is a review of this compliance. It’s a formal internal or external look at a company's financial records and operations to ensure that they are accurate and reliable. It looks at what your organisation has been doing, and makes sure it’s in line with any claims.

What’s the difference between a compliance audit and an internal audit?

A compliance audit will evaluate how well your organisation follows outside laws and regs that cover your industry. 

An internal audit looks at how well your company follows its own internal codes of conduct and formal processes.

The most common types of compliance audits

The most common types of compliance audits are financial, environmental, and health and safety based.

Financial audits ensure your company's coffers are appropriately managed and your statements are accurate. Environmental audits look at your company's environmental footprint and whether you comply with the appropriate regulations. And health and safety audits evaluate the working environment, and assess whether you’re keeping your employees safe and well.

The most popular type of official audits

PCI Compliance Industry Audit

The Payment Card Industry Data Security Standard (PCI DSS) is a regulatory standard for organisations that handle or process card payments. So it’s a must for any merchant, service provider, or subservice provider who’s involved in handling cardholder data. PCI DSS is a standard for companies that process, store, or transmit debit or credit card information. The aim is to keep to the highest possible credit card security, and safeguard people against fraud.

Failure to comply with these requirements can lead to ‘lawsuits and hefty fines’ according to Cloud Infrastructure Services.

SOC Compliance Audit

A SOC Compliance audit is a must for security-conscious businesses. It shows that your company maintains a high level of information security via strict compliance requirements, ensuring sensitive information is handled responsibly, and the privacy of your clients is upheld. 

Failing a SOC Compliance audit means customers don’t have a reason to trust you, or work with you!

ISO Compliance Audit 

ISO standards are like, ‘a formula that describes the best way of doing something’ according to ISO themselves. For example, quality management standards, environmental policy and objectives, organisational structure and duties, data management, food safety, health and safety processes, consumer satisfaction, and so on.

If you fail an ISO audit, you risk the removal of your certified status.

GDPR Compliance Audit

If you’re GDPR compliant, this means you fall under the legal General Data Protection Regulation (GDPR) requirements for properly handling personal data. The GDPR has certain steps your organisation must follow, which limits how you use people’s personal data.

If a company has GDPR issues, it can result in a fine of 10% of turnover.

How often should a compliance audit be done – and by who?

This really depends on the audit, the industry, and the size of the company. Some industries like healthcare, financial services, and government departments are more heavily regulated and get annual audits.

The general school of thought is that all companies should conduct regular internal audits to spot any areas of non-compliance – with these internal audits acting as a sort of ‘fire drill’. If any worrying things are identified, these can then be ironed out before any external regulators get involved.

What are the benefits of using compliance audit software?

Using compliance audit software can help improve the efficiency of the compliance process overall. They can automate repetitive tasks, help with data collection and analysis, monitor compliance, and generate reports. 

They can also help keep your employees up to speed on your company’s general compliance goals, which makes it easier for them to manage any issues should they arise. This kind of software can also improve audit quality and reduce errors by ensuring that compliance standards are consistently applied. Safety Culture lists ten of the best types of compliance software including a few free apps and options too. Blockchain technologies like our platform FALKOR SI can also help you achieve compliance, and compliment compliance audit software, ensuring that data produced during an audit is defensible and its source indisputable, especially in areas like GDPR, and data security.

How does compliance auditing relate to blockchain and cybersecurity?

Compliance and blockchain technology are the perfect duo. All thanks to blockchain technology’s ability to create secure, trustworthy and tamper-proof records, which make compliance audits swift and unbelievably efficient. Not to mention cost effective.

Security, in particular cybersecurity, is a vital aspect of compliance. It helps protect all company and client data and sensitive information from unauthorised individuals. Compliance auditing can evaluate a company's cybersecurity, and make sure they have proper safeguards in place to protect their assets.

Certain sectors which are regularly audited like governments happen to be the least digitised by a mile. Yet with so much data now in circulation, we need the tracking, traceability, and resulting transparency that blockchain easily provides, which in turn can make auditing a breeze.

What FALKOR SI and ByzGen can do for you

Compliance auditing and authenticity of the data being validated is a really crucial process for any business that operates in a regulated industry. Or any company that’s keen to maintain ethical and socially responsible practices. 

By using compliance audit software combined with blockchain technology, companies can not only automate repetitive tasks and improve the consistency and accuracy of their compliance evaluations making them much more efficient – but also be confident in the defensibility of the audit data, should litigation or questions be raised as a result. With so many companies focussing on sustainability and cybersecurity, defensible compliance audits are a critical requirement to fostering trust with stakeholders and avoiding criticism and damaged corporate reputation. 

Here at ByzGen, we’ve used our FALKOR SI platform to solve these compliance challenges directly, including financial regulatory reporting, and providing a distributed events audit framework for a smart manufacturing hub

If you want to know more about our enterprise blockchain platform FALKOR SI and what it can do for you in this area or any other, please don’t hesitate to get in touch.

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