Types of Compliance Audits

Compliance risk definition can be recorded as the potential exposure of an organization to legal liabilities, monetary forfeiture, and material loss. Associations of all kinds and sizes are open to compliance risk. An organization's failure to comply with applicable laws and regulations can affect its revenue.

What is compliance risk?

Compliance risk definition can be recorded as the potential exposure of an organization to legal liabilities, monetary forfeiture, and material loss. The risk can result from the failure to act in compliance with industry laws and regulations or internal policies. Compliance risk can also be said as integrity risk.

Associations of all kinds and sizes are open to compliance risk, whether they are public or private. The companies are for commercial purposes, or nonprofit, state or federal, all exposed to compliance risk. An organization's neglect to concede with applicable laws and regulations can affect its revenue, which can lead to loss of reputation, business opportunities, and valuation.

What are the types of compliance?

An organization should imply the following types of compliance risks:

External Compliance External Compliance guides to compliance with the employment rules, labour laws, and criteria set by the governmental authorities to evade any harmful influence on the goodwill of the company. Complying with all the regulations guarantees any undue repetition of efforts of resources. 

Internal Compliance: Internal compliance guides to an internally developed set of policies and regulations that the owners, employees, traders, customers must follow to preserve the quality of the services or goods furnished by the company. 

The compliance to a company ensures protection concerning:

• Corrupt and illegal practices: Legal compliance confirms that the institution, its representatives, and workers are enduring the laws and regulations of the initiative. Common risk compliance involves illegal practices and includes fraud, bribery, theft, embezzlement, and money laundering.


• Privacy breaches: A typical compliance risk is the breach of privacy laws. Hacking, malware, and virus impose cyber risks that negatively affect organizations. Further, if a business regulates sensitive information, it is necessary to take appropriate actions to protect that data and prevent privacy breaches.


• Environmental concerns: These compliance risks deal with pollution control and environmental damage an industrial operation can generate by the use of harmful chemicals, the devastation of natural habitats, dangerous waste dumping, and pollution of groundwater. Many businesses are incorporating sustainability into their enterprise procedures, furnishing their workers with movement, and helping them acquire environmental compliance.


• Process risks: Procedural risk is the inability to follow a specified procedure for conducting an assignment or a variation from the usual process. For example, a business must have a registered procedure for accessing its network remotely. If a worker manipulates the proper procedure for remote access, it is deemed a process risk.


• Workplace health and safety: Companies are legally mandated to follow detailed health and safety protocols. One important example of compliance is the Maternity Benefits Act 1961, which imposes women's job security during their maternity and allows them a 'maternity benefit'. This Act discourages any kind of termination or pressure on the expectant woman in the name of job security. This applies to all companies employing at least 10 persons.