Skip to content
Contract Management

Compliance Audits: What You Need to Know to Avoid a Penalty

September 10, 2020

compliance audit
compliance-audit

Get a hold on your compliance

Start managing your compliance today, with G2 Track.

There are certain societal expectations everyone follows without question.

Stopping your car at a red light. Brushing your teeth before going to the dentist. Covering your face when you sneeze.

The same can be said for the ins and outs of running a business. If you don’t comply with specific rules and regulations, a fine or penalty could be around the corner. Because of this, it’s crucial for any business to follow the standards set in place by the compliance audit that best represents their industry.

In other words, a compliance audit will answer the question, “Is this company doing what it’s supposed to be doing?” The report will fill any gaps in compliance while also making recommendations for ways to solve the issues.

In business, there are two types of audits that can be confused for each other: a compliance audit and an internal audit. The confusion stems from the fact that they may be conducted by the same person, but they review different aspects of your business.

It’s important to keep in mind that an internal audit will gauge how well an organization follows its own internal codes of conduct and formal process. On the other hand, a compliance audit will evaluate how well an organization follows outside laws and regulations that cover various industries.

Compliance audit vs internal audit


If you want your company to remain profitable and in business for the long term, then knowing rules and regulations in the compliance audits that apply to your industry is a must. Learn more about each type of audit and how G2 Track can help make staying compliant that much easier.

Why are compliance audits important?

Everyone wants to think their business is the best… and some are. But how many restaurants have you visited with the phrase world’s best cheeseburger? Probably a few.

While yes, some businesses really do offer the best of something, if no one is checking what actually is the best, there’s nothing besides word-of-mouth to prevent a business from claiming they offer the best service, product, or solution on the market.

Because most small businesses operate on a smaller scale, there’s less of a threat to their customers than larger businesses. However, what would happen if a large business like Google or Amazon didn’t meet the proper security standards, leaving millions – or even billions – of customers at risk.

Compliance auditing is important because if you don’t at least meet the basic standards, you open your business and all of its customers up to massive problems.

These audits help to verify processes like:

  • The security of sensitive data
  • The records of financial departments
  • Health and safety
  • Payroll
  • HR policies
  • Management standards

The compliance requirements are in place to protect consumers and the industries that serve them. Ensuring that all providers offer the same standards. When businesses fail to comply, this can lead to all sorts of trouble, including fines, and in the worst case, shutdowns.

Types of compliance audits

Regardless of your specific situation, it’s important to have a working knowledge about the types of regulatory compliance audits and what they entail. Below is a list of the most common compliance audits you’ll experience at your organization.

1. HIPAA (Health Insurance Portability and Accountability Act of 1996)

Passed in 1996, the Health Insurance Portability and Accountability Act serves to protect the privacy and security of American’s medical information as a way to reduce healthcare fraud. It also works to ensure coverage for employees who have lost or changed jobs.

This type of compliance audit covers businesses within:

  • Health insurers
  • Health care cleaning services
  • Any healthcare provider who transmits health information

 

If you fall within these types of businesses, it’s up to you to ensure proper measures are being taken to protect health data and that it’s used, shared, and stored correctly internally. There should be technical, physical, and administrative safeguards in place as a way to secure all sensitive information and personal data. If you don’t, fines can reach into the millions depending on the level of negligence.

A HIPAA audit also provides patients with the peace of mind that their private information is secure and never shared with the wrong people.

Tip: Learn more about healthcare compliance and what is required from your business.

2. PCI-DSS (Payment Card Industry Data Security Standard)

Payment Card Industry (PCI) compliance is a set of regulations developed to ensure that the credit card industry is properly managing and securing customer data. Before it was formed in 2006, there was no clear industry standard that all credit card companies had to follow, and that's a problem for any company that deals with big data.

The DSS portion of this audit, Data Security Standard, are the regulations being placed on anyone who has to follow PCI compliance.

In 2006, Visa, MasterCard, Discover, and American Express (AMEX) established the PCI Security Standards Council (PCI SSS) to help regulate the credit card industry and establish clear operating guidelines for how consumer credit card information should be handled. These standards apply to any organization that processes payment cards or creates the infrastructure to process payments.

To ensure your organization remains compliant, you must:

  • Evaluate business processes, IT infrastructure, and credit card handling procedures to identify risks to credit card data.
  • Discover and solve any gaps in security to avoid a data breach.
  • Avoid storing any sensitive cardholder information, including PINs and social security numbers.

If your company neglects to adhere to these rules and regulations, you could receive a fine of up to $100,000 per month of noncompliance.

3. SOC 2 (Systems and Organizational Controls)

SOC 2 is a compliance audit defined by the AICPA (The American Institute of Certified Public Accountants) and is a common compliance standard for modern technology companies. It mainly applies to service providers who store customer data in the cloud. SOC 2 requires these companies to be compliant as they follow strict policies and procedures set in place to protect this private information.

To achieve SOC 2 compliance, most companies prepare themselves for anywhere from six months to a year, including identifying the scope of the audit for their businesses, developing policies and procedures, and putting new security controls in place to reduce risks. Its main focuses are security, privacy, confidentiality, availability, and processing integrity.

There are two types of SOC 2 audits:

  • SOC 2 Type I: Audits a vendor’s systems and checks for whether the security controls are properly designed.
  • SOC 2 Type II: Audits the effectiveness of a vendor’s operating systems. It’s conducted over a period of time, typically six months for the first audit.

4. SOX (Sarbanes-Oxley Act of 2002)

Passed by Congress in 2002, the Sarbanes-Oxley Act is mandatory for all public companies.

After major corporate scandals from Enron, Global Crossing, and World.com SOX introduced substantial changes to the regulation of financial practice and corporate governance. The overall goal of this compliance audit is to protect investors by improving the levels of accuracy and reliability of all corporate disclosures.

The rules and regulations that SOX includes are:

  • Electronic records management
  • Internal controls reporting
  • Data protection
  • Executive accountability

SOX can be a pretty broad compliance audit. Because of this, both your finance and IT departments need to work together to align their efforts and processes to ensure everything is within the standards. For example, IT departments are required to properly store and manage corporate records. The rules require that there’s no tampering with regulated documents and that they’re properly encrypted and securely stored using the same guidelines as public accountants.

From a financial and management perspective, SOX requires that management teams take responsibility for their own financial records and that specific financial disclosures are made to shareholders, including off-balance-sheet transactions and stock transactions of executives.

If not, the result could be major penalties for the CEO and CFO of your organization.

Tip: For more tips on how to manage your IT department, check out our comprehensive guide!

5. ISO (International Organization of Standardization)

The ISO (International Organization of Standardization) compliance audit is part of the ISO/IEC 27K Series and is an information security compliance standard that helps companies manage the security of assets, such as employee or third-party data, financial information, and intellectual property.

Like SOC 2, the audit involves a risk management process that includes people, processes, and technology. Both standards require that an independent auditor assess a company’s security controls to ensure it's mitigating risks properly.

ISO works with over 160 countries to regulate industry standards as a way to align business practices and resolve any issues that may arise regarding equipment or processes.

One thing to remember about ISO is there’s a difference between being ISO compliant and ISO certified. To be considered ISO compliant, your organization has yet to undergo a formal certification audit. In order to be ISO certified, you will have to undergo a longer auditing process by a third-party who will evaluate your adherence to all ISO standards.

While being certified is voluntary, doing so helps your business increase customer trust and satisfaction.

6. GDPR (General Data Protection Regulation)

The EU’s general data protection regulation (GDPR) is one of the most comprehensive government-imposed data privacy frameworks implemented to date. It went into effect in May 2018 and is meant to protect the data privacy of EU citizens. However, this compliance regulation doesn’t just apply to European companies; anyone who processes the data of European citizens is required to comply.

Today, GDPR auditing is mainly self-driven and follows a four-step process:

  • Planning: A step-by-step follow of the law’s requirements to create a plan in terms of owning key processes and improvements.
  • Gap analysis: Locating the gaps within your company’s processes and accounting for any areas that aren’t within GDPR requirements.
  • Remedy gaps: Rank and prioritize the key areas to fix based on the associated risk level.
  • Test new processes: After a remediation is completed, assess the effectiveness of the new processes that were put into place.

Like HIPAA violations, a GDPR compliance violation can come with a pretty hefty fine. Failure to meet these regulations can amount to 20 million euros or 4% of the total annual turnover of the financial year, whichever is higher. If your company deals or processes data of EU citizens or residents, offer goods and services to EU citizens or residents, or you plan to in the future, a GDPR audit could be on the horizon.

Tips for passing a compliance audit

If your organization is preparing for a compliance audit, here are some tips to follow – no matter your industry – so you can avoid as many costly fines, penalties, and violations as possible.

Implement G2 Track

Getting a handle on everything to do with compliance can be complicated. With so many rules and regulations to follow, your team should be using a tool that keeps all of your data in one comprehensive and easy-to-read dashboard, like G2 Track.

Since G2 Track brings all of your vendor data, from invoices to renewals and even compliance, into one clean view, nothing gets overlooked. It’s never been easier to stay compliant as you track and evaluate vendor practices, ensuring every application meets industry standards.

"G2 Track provides a place for me to do software asset management. I now have visibility to our total software committed spend, invoicing/billing, and compliance."

Jason B.
G2 Track Review

In addition, G2 Track ensures you know every app in-house with access to employee and company data. This will keep all data close to the chest, making it easy to monitor the activity of all of your users and vendors. This gives you bulletproof evidence of who did what, when, and how.

One of the concerns at larger organizations with hundreds of tools within their tech stack is knowing if they’re staying compliant with how they’re being used, on top of if all of the varying vendors are also remaining compliant. 

It can be a lot to keep track of, especially if your vendors aren’t publishing their own reports. To make this easier, G2 Track is integrated with their very own Compliance Hub, which helps businesses of all sizes ensure their vendors comply with standards, and it does this all in real-time. This helps to eliminate any risk of falling out of compliance because of lost documents, resource constraints, or even human error.

The Compliance Hub is your all-in-one look at everything IT, security, business operations, and compliance, to monitor the data, privacy, security, and company governance of every single product your company uses. G2 Track auto-populates compliance statuses with publicly-available data from the vendors you use. This gives you a  crystal clear and always up to date understanding of the compliance of every application.

Additionally, the G2 Track Compliance Hub:

  • Provides a comprehensive look into compliance and security by tracking the most common compliance standards per product, per certification.
  • Makes it easy for you to create additional compliance items you need to monitor, like IT security, customer privacy, and data processing certifications.
  • Allows you to save any important certifications to each application, and notify you to any certificates you may be missing. 

G2 Track Compliance HubDo your research

There are certain things you just need to be prepared for. Taking your driver’s test. Running a marathon. And conducting a compliance audit.

It’s in your best interest to look up the requirements to pass and then enforce those requirements as mandatory stipulations in your organization. The smartest way forward is to research the audits that apply to your specific business and see what you need to do to meet the standards -- if you don’t already,

Perform a self-audit

Once you’ve done the research, conduct a self-audit on your business. You can choose to appoint an internal employee to perform the audit, like your organization’s compliance officer, but an independent auditor could be a better option, especially if internal resources are limited. Take the time to have proper documentation and follow-up processes to correct if there are any areas that need to be improved to pass the real audit.

Watch out for regulation updates

Just like things change at your company, from new policies to the preferred software, changes happen fast at regulatory agencies. Staying compliant means making an effort to watch for changing enforcement priorities, laws, and regulations before it’s too late.

Train your team

Your business can only be as compliant as the people within it. Because of this, make it a priority to train your employees on what it means to be compliant. Whether your employees are remote or on-site, they need to be fully informed on security policies, what needs to be within financial statements, how personal information is stored or recovered, how to create a strong password, what a phishing email looks like, and more. That way, they’ll be ready for the compliance auditors when the time comes.

Have high standards

It’s clear passing your compliance audit can make or break your company, no matter how small or what industry you’re in. When you know the ins and outs of which audits apply to your business, and utilize a tool like G2 Track to keep you in line with the changing standards and regulations, your chances of passing are that much greater.

Passing your compliance audit can save you from paying a pretty hefty fine. Find out more about how G2 Track can help you manage compliance, spend, usage, and more, all while optimizing your tech stack by requesting a demo!

compliance-audit

Get a hold on your compliance

Start managing your compliance today, with G2 Track.

Manage your software costs with G2 Track.