Whether your organization is large or small, compliance is an important part of running a successful business.
But what exactly does compliance mean and how can you tell if you’re compliant?
A compliance audit is a formal external review of an organization’s operations and procedures to ensure they are following all applicable laws, rules, standards, and regulations. In other words, a compliance audit asks, “Is the company doing what it’s supposed to do and what it has agreed to do?”
The audit report identifies any gaps in compliance and makes recommendations for resolving the issues.
Visualizing these processes and operations is one of the best ways to accurately observe and evaluate compliance in a complex system. Visualizing the data helps the auditor identify and understand any disconnects in the process flow so they can make more precise judgments and recommendations.
Compliance is important for maintaining professional standards of business, reassuring partners and clients, and protecting consumers. Noncompliance could lead to significant penalties and sanctions, and damage to your reputation, so regular compliance audits are crucial to ensure everything is in order.
Compliance audit vs. internal audit
Two common types of audits that often get confused are compliance audits and internal audits. Although compliance audits and internal audits may be conducted by the same personnel, they review different aspects of the business.
The difference between a compliance audit and an internal audit is that compliance audits evaluate the organization’s adherence to outside laws and regulations (that may apply broadly across industries), whereas internal auditing gauges how well the organization adheres to their own internal codes of conduct and formal operational processes.
Though the two audits are distinct, it is helpful to conduct both in order to gain a comprehensive understanding of your internal and external compliance.
Types of compliance audits
There are many different types of compliance audits based on various industry and governmental regulations. The kind of business you run, where it operates, and what data you handle will determine what compliance audits you should be prepared for.
Below are a few of the main types of compliance audits you may encounter:
HIPAA compliance audit
The Health Insurance Portability and Accountability Act (HIPAA) was passed in 1996 to protect the privacy and security of Americans’ medical information, reduce healthcare fraud, and ensure coverage for employees who lose or change jobs.
Who HIPAA applies to
Any company that handles protected health information for clients in healthcare treatment, payment, or operations must comply with HIPAA. Protected Health Information (PHI) includes data in digital, hard copy, or oral form.
Covered entities include health insurers, health care clearinghouses, and any health care provider who transmits health information (including business associates, such as contractors).
For patients, HIPAA compliance provides peace of mind that their private information is secure and properly handled, shared, and protected.
Compliance guidelines
So what does compliance mean for you and your business?
Broadly speaking, you will need to ensure proper measures are taken to protect the privacy and security of health data that is used, shared, and stored by your company. Your processes should include technical, physical, and administrative safeguards.
Noncompliance can result in severe penalties depending on the level of negligence. Fines can reach millions of dollars and some violations carry the risk of criminal charges and jail time.
Conducting a HIPAA compliance audit can help you identify gaps in your data security and processes and prevent costly violations.
GDPR compliance audit
The General Data Protection Regulation (GDPR) is legislation passed by the European Union (EU) in 2018 that affects any organization in the world that collects or processes data related to citizens of the EU.
So even if you are a U.S. company, you must comply with the GDPR if your business:
- Processes the personal data of EU citizens or residents
- Offers goods and services to EU citizens or residents
The goal behind the legislation is to align data privacy laws across Europe to provide more consistent and effective privacy protection for EU citizens.
GDPR requirements
The GDPR has broad standards that can make compliance tricky to navigate. However, there are several key privacy and data protection requirements:
- Organizations must have consent from the subject to process their data.
- Collected data must be anonymized.
- Data must be safely handled for cross-border transfer.
- Certain companies must appoint a data protection officer to oversee compliance.
Failure to meet GDPR regulations can lead to fines of up to 20 million euros or 4% of the total annual worldwide turnover of the previous financial year (whichever is higher).
In other words, staying on the right side of GDPR compliance is crucial. A GDPR compliance audit will help you get there.
If you haven’t performed a GDPR audit before, the first audit will likely be the most difficult and time-consuming because you will have to map out your entire data processing environment. But once you’ve performed your initial compliance audit, subsequent reviews will be much easier.
