What is a Compliance Report? Why Do You Need It?

The regulatory body develops industry standards, laws, rules, and regulations to govern the business. Every business impacts the people and their surroundings in a certain ratio; thus, the business activities must be regulated so that any possible negative impact can be controlled and minimized. Businesses are directed to comply with laws, rules, and regulations on this account.

A compliance report presents the compliance structure to be followed by the business entity. This report is also produced during the audit to ensure that the compliances are properly fulfilled. This study discusses the elements of Compliance Report and the need for Compliance Report.

What is Compliance Reporting?

The detailed analysis of compliances followed by the company is known as compliance reporting. Various aspect of the compliance report is mentioned below:

• The Chief Compliance Officer (COO) of the company is responsible for creating the compliance report.
• It includes the details of both national and international laws applicable to the company.
• The compliance reporting ensures that a compliance management system is implemented.
• The compliance reporting is useful for the board, senior executives, auditors, regulators, business partners, and others for decision-making purposes.
• The compliance reports must be useful to the reader to allow them to understand the level of compliances applicable to the company and how they are fulfilled.

Overall, the compliance reporting is based on the standards and implementing procedures to ensure that the company's compliance structure is working effectively.

What can be Compliance Reporting examples?

Compliance reporting can represent various matters as per the applicable regulatory requirements. It can take different forms and structure that is most suitable for the company. Some compliance reporting examples are:

• Internal accounting controls
• Review of due diligence programs
• Policies and internal controls for Know Your Customer (KYC) compliance
• Documentation and testing of security controls system
• Review policies for risk management
• Report on environmental compliance and enforcement etc.

For any or all compliance obligations of the company, an effective compliance program must be able to produce reports on them.

Why is there a need for a Compliance Report?

Setting up functional compliance reporting procedures is required for the company because of the following reasons:

• To measure the effectiveness of the ongoing compliance program.
• Identification of areas where more work is required to fulfill the requisite standards/ controls/ guidelines.
• This can lead to practical decisions making in various matters such as risk management policies, resource allocation, etc.
• Builds an ethical image of the company in minds of clients, customers, and investors.
• Can help to resolve potential non-compliance issues.
• Can act as a supportive document during the audit.
• It can also be useful to recognize the company's approach towards compliance management.
• The company can identify and adapt to the changing regulations with fewer efforts.

For some businesses, compliance reporting is a part of a statutory obligation, and for others, it might not be mandatory. But considering the benefits that come along can prove compliance reporting a useful tool for the company in the long run. It determines the compliances and helps to estimate the risk the company might face during its course of operations.