Compliance Audits
The purpose of a compliance audit is to determine whether the entity is following specific procedures, rules, or regulations set down by some higher authority.
A compliance audit for a private business could include determining whether accounting personnel are
following the procedures prescribed by the company controller, reviewing wage rates for compliance with minimum wage laws, or examining contractual agreements with bankers and other lenders to be sure the company is complying with legal requirements. In the audit of governmental units such as districts school, there is extensive compliance auditing due to extensive regulation by higher government authorities. In virtually every private and non profit organization, there are prescribed policies, contractual agreements, and legal requirements that may call for compliance auditing. Results of compliance audits are typically reported to someone within the entity being audited rather than to
a broad spectrum of users.
Management, as opposed to outside users, is the primary group concerned with the extent of compliance with certain prescribed procedures and regulations. Hence, a significant portion of work of this type is done by auditors employed by the entity itself.
There are exceptions; when an organization wants to determine whether individuals or entities that are
obligated to follow its requirements are actually complying, the auditor is employed by the entity issuing the requirements. An example is the auditing of taxpayers for compliance with the federal tax laws, where the auditor is employed by the government to audit the taxpayers’ tax returns.
The purpose of a compliance audit is to determine whether the entity is following specific procedures, rules, or regulations set down by some higher authority.
A compliance audit for a private business could include determining whether accounting personnel are
following the procedures prescribed by the company controller, reviewing wage rates for compliance with minimum wage laws, or examining contractual agreements with bankers and other lenders to be sure the company is complying with legal requirements. In the audit of governmental units such as districts school, there is extensive compliance auditing due to extensive regulation by higher government authorities. In virtually every private and non profit organization, there are prescribed policies, contractual agreements, and legal requirements that may call for compliance auditing. Results of compliance audits are typically reported to someone within the entity being audited rather than to
a broad spectrum of users.
Management, as opposed to outside users, is the primary group concerned with the extent of compliance with certain prescribed procedures and regulations. Hence, a significant portion of work of this type is done by auditors employed by the entity itself.
There are exceptions; when an organization wants to determine whether individuals or entities that are
obligated to follow its requirements are actually complying, the auditor is employed by the entity issuing the requirements. An example is the auditing of taxpayers for compliance with the federal tax laws, where the auditor is employed by the government to audit the taxpayers’ tax returns.
