Compliance Audit
Compliance with laws and regulations is one of its core aspects. A complete compliance audit is a systematic assessment activity that not only covers compliance with external laws and regulations, but also includes compliance checks on industry standards, internal rules and regulations, and other aspects. The purpose is to help organizations avoid risks and standardize operations.
Reduce risk and loss: Timely detection of potential violations can prevent consequences such as fines, license revocation, and legal proceedings. For example, a manufacturing company avoided hefty penalties from environmental protection authorities by rectifying its waste treatment process through environmental compliance audits.
Improve operational efficiency: During the review process, unreasonable internal processes can be streamlined and optimized to reduce resource waste. At the same time, employees should be made aware of compliance requirements to reduce rework, disputes and other problems caused by non-standard operations.
Enhancing brand reputation: A compliant business record can increase a company’s trust among customers, investors, and partners. For example, companies with a good compliance record are more likely to obtain bank loans and achieve major collaborations, which is also an important guarantee for the company’s long-term sustainable development.
Core Elements
Reviewing Entity
This can be done by an organization’s internal compliance or audit departments, or by outsourcing to a third-party professional organization. Internal audits are more familiar with the company’s business processes, while third-party audits can ensure independence and objectivity, and are commonly used in critical compliance assessments in heavily regulated industries such as finance and healthcare.
Audit Target
It covers the entire process and all aspects of organizational operations, including business activities (such as production processes and sales activities), management systems (such as financial systems and human resource management), core documents (such as contracts and financial statements), and employee behavior (such as workplace norms and integrity requirements).
Review Basis
First, national and local laws and regulations, such as the Company Law, Tax Law, and Environmental Protection Law; second, industry-specific standards, such as anti-money laundering regulations in the financial industry and patient privacy protection standards in the medical industry; and third, internal organizational rules and regulations, such as employee handbooks and financial reimbursement procedures.
Main Audit Content
Compliance with Laws and Regulations
These are the core elements. For example, tax compliance involves verifying whether a company’s tax returns are timely and accurate, and whether there is any tax evasion; labor compliance involves checking whether labor contracts, social security contributions, and overtime pay are in compliance with the Labor Law; and environmental compliance involves verifying whether manufacturing companies meet standards for waste gas and wastewater emissions and solid waste treatment.
Industry standard compliance
Different industries have their own specific regulations. For example, financial institutions need to verify that customer due diligence and suspicious transaction reporting comply with anti-money laundering standards; internet companies need to check whether the collection, storage, and use of user data comply with relevant industry regulations on data security.
Internal System Compliance
Audit the implementation of internal organizational rules. For example, check whether the purchasing department conducts procurement according to the internal bidding process, and whether employee expense reimbursements comply with financial regulations, to ensure orderly internal management and avoid risks caused by chaotic processes.
Compliance In Specific Areas
Specialized inspections are conducted targeting high-risk or specialized areas. For example, these include reviewing commercial contracts and cooperation agreements signed by companies to identify potential legal loopholes; and verifying the accuracy and timeliness of information disclosure by listed companies to ensure compliance with capital market regulatory requirements.
Standard Implementation Process
Preparation Stage
Clearly define the scope, objectives, and timelines of the audit, such as focusing on the financial compliance audit of a specific quarter; assemble a professional audit team, collect relevant legal and regulatory documents, internal policy documents, business records, and other materials, and develop a detailed audit plan.
Implementation Phase
Evidence was collected through methods such as reviewing documents, conducting on-site visits, and interviewing employees. For example, financial vouchers and tax declaration records were verified, the operation of environmental protection equipment in the production workshop was inspected on-site, and employees were questioned about their compliance with internal compliance systems.
Analysis and Reporting Phase
The collected evidence is analyzed to identify compliance issues and potential risks, and the severity of the issues is assessed. An audit report is then drafted, clearly outlining compliance highlights, violations, risk levels, and providing targeted corrective action recommendations.
Rectification and Follow-up Phase
The report will be forwarded to the relevant departments, urging them to implement corrective measures within the stipulated timeframe. The audit team will then need to track the progress of the corrective measures, verify their effectiveness, and ensure that the violations are completely resolved, thus establishing a closed-loop management system.
SUSTECH
SUSTECH is an innovative technology service company with artificial intelligence, big data, and blockchain at its core. We specialize in ESG (Environmental, Social, and Governance) testing, certification, and compliance management, helping companies achieve their sustainable development goals. Through digital and intelligent means, we are redefining the testing and certification industry, making ESG compliance more transparent, efficient, and credible.
Core Advantage: Technology-enabled ESG Compliance
Intelligent ESG Data Acquisition and Analysis
- IoT Environmental Monitoring: Real-time collection of data on enterprise carbon emissions, wastewater discharge, energy consumption, etc., and automatic generation of ESG reports.
- AI carbon footprint calculation: Based on supply chain data, it accurately calculates the carbon footprint of a product throughout its entire lifecycle, in accordance with international standards such as ISO 14064 and GHG Protocol.
ESG Certification and Rating Optimization
- Automated compliance checks: AI compares data against global ESG standards (such as GRI, SASB, TCFD) to identify ESG risks for enterprises and provide improvement suggestions.
- ESG Rating Enhancement Solution: Combining industry best practices, we develop actionable ESG optimization strategies to help companies improve their ESG ratings from MSCI, S&P, and other ranking bodies.
Blockchain-based Evidence Storage and Transparent Traceability
- Tamper-proof ESG reports: All test data is stored on the blockchain to ensure traceability and auditability, enhancing the trust of investors and regulators.
- Supply chain ESG penetration management: Tracking supplier ESG performance to ensure compliance with the requirements of major international manufacturers.
