A compliance audit’s goal is to ascertain whether the requirements of the relevant laws, rules, and regulations, as well as other directives and instructions issued by the competent authority, are being adhered to. Comptroller and Auditor General (CAG) of India recognised a regulation on Audit and Accounts, 2007. These rules establish the principles, approach, and processes for regulating compliance audits inside the Department as a separate stream of audits.
Elements of a compliance auditCompliance audits in Public Sector audits have certain basic elements
- Three parties in the audit i.e. the auditor, the responsible party, the intended user,
- Subject matter and
- Authorities and criteria to assess the subject matter.
Objective of Audit ComplianceThe objective of legal compliances in Audit is to identify the level of compliance of an organization, identify the compliance risk and enable the management to take steps the organization compliant with laws and regulations The term “Legal Audit” appears to be a very complicated term; yet, it merely refers to a periodic corporate health check-up. In India, the general perception of audits is that they are limited to tax audits; however, in this era of extensive research and development, as well as the globalization of business, there are other things that must be audited on a regular basis, and necessary upgrades to traditional practice must be made to keep up with changing business practices. A legal audit is a systematic review of a company’s assets and related risks and opportunities. Different industries have different requirements, but a legal compliance audit of a corporation is typically conducted to address the following legal issues such as being compliant with labour laws, being compliant with health and safety/environmental protections, corporate governance rules and data security requirements. An external or internal auditor uses a compliance audit checklist to analyze and verify an organization’s conformance to government legislation, industry standards, or the company’s own policies. Audit Checklists are Different for Legal Areas such as The Factories Act, The Payment of Wages Act, The Minimum Wages Act, The Equal Remuneration Act, The Industrial Employment, The Environment Protection Act, The Water Pollution Act, The Water Cess Act, The Air Pollution Control Act, Profession Tax of company and employees, Negotiable Instruments Act, Information Technology Act. Every Company has an Audit committee that supervises the financial reporting process, the audit process, and several other internal factors within a company. In India, Section 177 of the Companies Act 2013 read with Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 deals with the formation of an audit committee wherein the Role of Audit Committee in a listed company is specified. Company audits are a big thing in every department. Not being compliant may result in loss and breakdown of the company. There is a fear of audit resulting in a non-cooperative attitude of units, manipulation of records and concealment of facts, the threat of confidentiality of data, controlling and preventing mistakes and non-compliance between audit periods. Also, when it comes to vendor compliance audits, the principal employer will be held responsible and liable for the non-compliance of the vendor. So it is important for the principal employer to perform compliance audits on a regular basis for all the vendors. To counter these challenges, Ricago’s Audit Management System (AMS) is an enterprise-class compliance solution that digitizes the vendor audit process. AMS is a tech-enabled service that aims at overhauling the complete vendor audit management process and creating better controls and central tracking of all vendor and project-related compliances It automates the vendor audit process wherein audits vendor audits can be Scheduled, initiated, triggered, and completed in the system virtually. Clients will have dashboard access to the tool to track daily activities, assess vendor risk based on criticality scores, and generate risk reports and real-time collaboration.
- Customized check-lists depending upon the strength of the vendor staff
- Technolgy-based platform to monitor Vendor Compliances
- Real-time reports and dashboards with increased transparency
- Document repository of all vendor-related documents