Risk assessments, compliance checks, audit scope — the subject of internal compliance audits can seem daunting. But conducting an internal compliance audit is less about mastering jargon and more about creating a structured approach for evaluating your organization's compliance posture. Essentially, it's a diagnostic tool to ensure you're not only talking the compliance talk, but also walking the walk.
Why is this so important? To start, non-compliance can result in hefty fines and legal penalties. But what’s more, a well-executed internal audit uncovers invaluable insights into your operations, identifying strengths and weaknesses and offering recommendations for improvement. It allows you to address issues before they escalate into more serious problems.
Below, we’ll demystify the process and share the practical steps to conduct an internal compliance audit effectively.
What is a compliance audit?
A compliance audit is a comprehensive review of how well an organization follows its own rules for information security and data privacy. Some of these may be rules the organization is legally required to follow, such as HIPAA or GDPR. Some may be rules the organization has chosen to follow as best practice, such as SOC 2, ISO 27001, or PCI DSS. Sometimes it's both.
Compliance audits also test the effectiveness of an organization’s security controls. Do they function as intended? Are there any gaps that need to be filled?
Compliance audits vary widely depending on several factors, including:
- Customer base
- Public vs private company
- Type of data handled
It’s important to note that compliance audits are not the same as continuous monitoring. Audits are distinct events, like projects, that are conducted by independent auditors. Monitoring is ongoing surveillance and reporting of an organization’s controls, usually involving automated tools.
Compliance audits are also distinct from internal audits. An internal audit is meant to provide independent assurance that an organization’s risk management, governance, and internal processes are sufficient and operating effectively. Internal audits can cover a range of processes, from financial practices to operations, IT governance, and risk management.
Compliance audits are more narrow in scope, focusing on ensuring the organization is adhering to the requirements of any external laws, compliance regulations, and/or security standards that apply to the business.
Examples of compliance audits
- A Sarbanes-Oxley Act (SOX) compliance audit would have to prove electronic communications are secure and backed up by a disaster recovery plan.
- A Health Insurance Portability and Accountability Act (HIPAA) audit would be conducted to attest that protected health information (PHI) is kept secure and private.
- A Payment Card Industry Data Security Standard (PCI DSS) audit would have to prove that payment card data is kept secure and private.
For all compliance audits, organizations must produce documented evidence that proves they meet each requirement via the appropriately implemented controls. These audit trails typically include hundreds of documents, including, but not limited to; event and access logs, security policies and procedures, security awareness training certificates, and so much more.
Types of compliance audits: Internal vs. external
Internal compliance audits are often conducted by the organization's own employees. If not done by an own employee, they can be done by a third-party. Internal audits gauge the overall performance of the compliance program, identifying any new risks or opportunities for improvement. Each organization must decide their own audit timeline, in accordance with the compliance framework they are pursuing, whether that be annual, biannual, or quarterly.
External compliance audits are conducted by an independent third party, such as a certified public accountant or audit firm. The exact format varies depending on the specific framework. Generally, external compliance audits assess whether the organization's security program satisfies compliance requirements.
Organizations use compliance reports to:
- Prove compliance to regulatory bodies, board of directors, prospects, or investors
- Identify and proactively manage organizational risk
- Adjust security policies, processes, or training needs to improve operational efficiency and threat protection
- Promote accountability across the organization for upholding cybersecurity and data privacy standards
- Build customer trust and drive revenue growth
How an external compliance audit works
What happens during an external compliance audit? It depends on the framework or standard you’re being evaluated for, but in general, an external compliance audit will follow these steps:
- Company leadership will evaluate and select an independent auditor or auditing firm. They will then meet with the compliance auditor to discuss the audit type, scope, timeline, and process.
- The external auditor assesses the organization’s security policies, business processes, systems, and internal controls against framework requirements.
- The auditor reviews documentation, tests controls, and interviews personnel.
- The auditor issues a final audit report or certification
- The organization completes periodic internal or surveillance audits, or annual recertification audits, to maintain their compliance status
How to conduct an internal compliance audit + checklist
Conducting an internal compliance audit is a meticulous process that requires experienced personnel, clear communication, and attention to detail.
Step 1: Determine scope of the audit
The first step is to define the purpose and goals of the audit. Which frameworks or regulations are you assessing against? What risks or threats are you trying to mitigate? What changes have occurred since your previous audit?
Step 2: Select an internal auditor
Perhaps the most important aspect of an effective internal audit is selecting the right auditor. It’s essential that the internal auditor is completely objective. Find someone within your organization who wasn’t involved with designing or implementing your security controls. This person should also have excellent communication skills, be detail-oriented, and have strong analytical skills. It’s also important to consider the impact on the individual’s workload, given the time commitment required to conduct a thorough internal audit.
Step 3: Prepare for the audit
Compile and organize the documentation you’ll need to present to your internal auditor. Exact documentation will vary depending on the applicable frameworks, but will likely include:
- HR and corporate policies
- Operational procedures, including data handling procedures, disaster recovery and incident response plans, etc.
- Financial records such as tax returns, financial reports, and financial statements
- Vendor and employee contracts
- Any previous audit reports and compliance certifications
- Access and incident logs
- Security awareness training records
Step 4: Conduct the audit
Your appointed internal auditor will review documentation and evidence, walk through workspaces, examine infrastructure and security controls, and conduct interviews to assess your level of compliance.
Step 5: Create the audit report
The internal auditor will deliver a written report summarizing the audit process, their findings, and their recommendations to address any areas of risk.
Step 6: Remediate nonconformities
The organization will use the recommendations in the internal audit report to address any untreated risks or fill any gaps in its compliance posture.
While every organization’s needs are unique, a compliance audit checklist can be a useful guide for getting started. Below you’ll find a checklist of the main points an internal compliance audit should cover for your reference.
Internal Compliance Audit Checklist
Reporting and Documentation
Simplify external and internal compliance audits with automation
Just like regular oil changes and maintenance keep your car running smoothly, compliance audits are essential for a healthy security program. They help companies identify and fix weaknesses, reduce risk, and in some cases, prevent legal issues or non-compliance penalties.
Compliance automation software like Secureframe is helpful not only for streamlining your internal audits but for improving your entire security program.
Risk monitoring and mitigation
Create, monitor, and review risks on an ongoing basis with Secureframe’s Risk Library and Risk Register. Easily view, add, and update existing risks and keep track of your risk history to stay compliant with framework requirements.
Secureframe continuously monitors your tech stack for nonconformities so you never fall out of compliance.
Automated Evidence Collection
Our platform automatically pulls audit evidence, saving hundreds of hours of manual work preparing for your internal or external compliance audits.
Map tests and controls to multiple standards to achieve compliance with in-demand frameworks and complete faster compliance audits.