Compliance Audits

 

 

The Guide for

Compliance Audits

Let’s first take a look at what a compliance audit involves. It is an independent assessment that ensures that an organization complies with laws, regulations, policies and procedures, whether they are laws, rules or regulations.

 

Compliance audits, however, are not just financial. They include IT or other security issues, HR compliance, quality management systems and other areas. All formally registered companies and organizations are bound by federal and state laws, which govern non-discriminatory employment, good health and safety conditions and safe financial transactions.

 

Broadly speaking, compliance audits aim for the following objectives:

  • Identify Risks;
  • Eliminate Risks;
  • Monitor Risks;
  • Manage Risks;
  • Warn and raise awareness of Risks.

 

Staying legally compliant is essential to maintaining and upholding the integrity of your company’s mission. Benefits of maintaining regular compliance audits include:

  • Provide a stress-free work environment for employees;
  • Increasing employee productivity;
  • Avoiding compliance fines;
  • Maintaining business operations without interruptions or shut-downs;
  • Assuring the business's reputation.

 

Types of Compliance Audits

The requirements for legal compliance audits vary by industry. However, the following legal concerns are the most common: 

  • Respecting labor laws: Possibly the most rigorously scrutinized area is the protection of workers' rights. Every year, the Department of Labor audits companies to ensure compliance with corresponding rules and regulations.
  • Environmental and health protections: Failure to comply with safety regulations can result in legal fees, payouts to the victims, and fines from government agencies such as the Occupational Safety and Health Administration.
  • Corporate governance guidelines: A company owes its investors and the government sustainability, accountability, and transparency. Governance audits have the aim of verifying the financial and governing decisions and policies of an organization's executive team.
  • Maintaining data security compliance: Data retention by businesses is legally required to be protected from leaks and abuse. Compliance audits typically evaluate whether or not a company uses updated communication software and hardware that are password protected as well as other solutions that ensure data confidentiality and prevent misuse.

 

Key Areas in a Compliance Audit

 

Performance: In auditing the bottom line of the franchisee's business, many other elements become important - whether the franchisee is providing the franchisor with the necessary reporting regularly, like a monthly profit and loss statement, budgets, etc, and whether this is done on a timely basis. Performance audits should dig deeper into the engagement of franchisees within the franchise system by examining whether they attend meetings and conferences and if they send team members to franchisor-facilitated training programs.

 

Product: This includes: 

  • Compliance with the range of core services
  • Using approved and preferred vendors
  • Display and merchandising of products
  • Maximizing sales through product mix ratios

 

Promotion: Franchisees should be provided with a corporate style guide that details what they can and cannot do with brand elements, what type of social media they can use, etc. It is important to mention uniforms and other standards that franchisees and their employees must adhere to.

 

Premises: An organization's shopfront, office, and even vehicles are how the public perceives it. For long-term success, it is critical that these standards are always met. This involves auditing the premises for cleanliness, accessibility, health, and safety obligations, and ensuring equipment is maintained properly. 

 

People: Franchisees within a franchise network may be held liable for breaches of the Fair Work Act. Therefore, franchisors need to ensure their franchisees are doing the right thing by their employees. It is important to check if: 

  • Wages and benefits are paid based on agreements.
  • Payslips are distributed according to regulations.
  • Employees' superannuation payments are made to their designated fund at the correct rate.
  • Validity of agreements with contractors.
  • Records of written warnings, meeting minutes, and performance reviews are kept. 

 

Audits of Specific Industries

Laws vary by type and state and compliance audit checklists include priorities and areas of focus specific to an industry, state, or type of company. Audits can also be external or internal. While some audits are mandatory, others are voluntary and recommended for preventing future non-compliance.

 

Retail Compliance Audit

Retailers face high turnover and inconsistent practices across locations as top compliance challenges.  Maintaining consistency across dozens or hundreds of stores can be difficult. Noncompliance can damage a company's reputation and growth prospects if it directly affects customers and employees. This is where retail compliance audits help as they maintain everyone's understanding of workplace standards, whether it's merchandising, shelving, or displays. A well-conducted audit leads to:

  • Smoother store operations;
  • Improved employee relations;
  • Improved customer experiences

 

Compliance in retail refers to a brand's or a store's adherence to corporate, legislative, and/or regulatory guidelines. Displays, promotional signage, layout, cleanliness, and safety procedures are all considered as part of store compliance. Directives from a specific brand, such as display instructions, are part of brand compliance. For retail compliance, the focus of audits is on: 

  • Merchandising: The process of displaying and selling products to customers is merchandising. It involves planning a store layout and making sure the display and positioning of products meet corporate guidelines, as well as making sure that the store looks appealing to customers and is easy to shop at. Merchandising audits tell which products are selling well, and which products need to be restocked.
  • Safety and health: Ensuring that stores are safe for employees and customers by checking for any hazards and taking preventive measures. This includes sanitization routines, mask-wearing protocols, and limiting the number of stocked items. These audits are important to keep everyone safe and reduce risks. 
  • Operations: Cash handling, returns and exchanges, and daily routine practices such as opening and closing are covered in retail operations. These audits ensure employees are up-to-date on training and can do their jobs well. 
  • Store: This can help assess employees’ adherence to company protocols, safety, and emergency procedures, and check if they demonstrate product knowledge. This also helps ensure if storage materials and electrical systems are in good working condition and that emergency exits or fire exits are not blocked by supplies or inventory materials.

 

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