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Conducting Audits: Financial and Compliance Teams

coia4Companies with existing compliance programs are starting to focus on the importance of monitoring, auditing and improving their compliance programs.  The Sentencing Guidelines and the FCPA Guidance both emphasize the importance of transforming a compliance program from a “paper” program to an “evolving” compliance program.

A paper program is defined as policies and procedures with little assurance that the company is following the program, and following specific policies and procedures.  An “evolving” compliance program is one that has the proper structure and procedures and includes robust monitoring and auditing procedures which provide fresh information and then factored into modifications and improvements of the compliance program.

There are a number of tools which companies are reviewing and using in this process – employee surveys, desk audits, transactions testing, spot-checks, internal audits and annual assessments.  Internal audits are an important part of this mix.  They require significant time and resources.  Audits require “boots-on-the-ground” to conduct an audit and inspect records for financial transactions and compliance procedures.

The audit team should not be limited to staff from the internal audit office.  A compliance staff person should participate in the audit and take responsibility for reviewing the compliance issues at the local office, country office or regional office.  It is important for the audit to be conducted by a team of auditors and compliance staff.

While it is not the usual practice, a compliance staff person can help to conduct the review, interview employees, and become familiar with the local atmosphere and compliance culture.  In a sense, the compliance person needs to become the “face” of compliance, build interpersonal relationships with local staff, demonstrate cooperation and availability, and promote the compliance message.aml8

Internal auditors regularly review and audit compliance issues such as training attendance and compliance certifications.  Also, internal auditors are very capable of interviewing employees and seeking explanations for unusual expenditures.  Adding a compliance staff member to the team will only enhance the ability of the team to conduct an effective audit.

With the team approach, internal auditors can focus on reviewing financial transactions.  Compliance staff can focus on compliance issues such as tone at the top of the local office, third-party due diligence, employee complaints, and gifts, meals and entertainment expenditures.

The importance of an auditing-compliance team is particularly important given the fact that companies typically conduct less than twenty (20) audits a year because of resources and costs.  With such a small number of audits, compliance staff can use the opportunity to conduct additional training of staff on specific issues.

auditMost auditors would welcome the participation of compliance staff.  It relieves the auditors of some of the audits tasks and lets them concentrate more on the financial issues.  Teamwork is an essential value for every compliance program.  Auditors and compliance staff are used to working together and coordinating their efforts.  Bringing their strengths to focused internal audits is an important part of their collaborative relationship.

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