How to chart a safe and streamlined path to compliance, no matter the standard
For companies moving at lightspeed, compliance standards can create a particular set of frustration. Across sectors, organizations must meet compliance standards set by governments or industry groups to conduct business securely and in good standing. If these companies can keep the faith, they’ll soon reap the benefits of their compliance efforts. But achieving compliance often requires more than filling out a form or making a declaration. Through compliance audits, an organization ensures it meets the relevant standards and demonstrates that compliance to the public.
But what is a compliance audit? When is one necessary? Who conducts the audit itself, and who is responsible for any remediation steps uncovered in the process? Knowing the answers to these questions and more will make the process of achieving compliance faster and smoother, shortening your time to market without sacrificing due diligence.
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What Are the Steps of a Compliance Audit?
What Triggers a Compliance Audit?
What Are the Penalties for Failed Audits?
What Is a Compliance Audit?
A compliance audit is a rigorous and comprehensive review of an organization's technology and policies to determine whether or not they meet regulatory standards. That review culminates in an audit report, which describes and evaluates the organization’s compliance preparations, access controls, security policies, and risk management, among other things. The exact audit targets and criteria change according to a few factors, such as whether the organization is public or private, what type of data it handles, and whether or not that data is sensitive.
Independent auditing firms typically carry out compliance audits to avoid conflicts of interest. Receiving a positive result from such an audit reassures an organization that its security and integrity efforts are sufficient and demonstrates to potential customers that the business takes these standards seriously. On the other hand, an unsatisfactory audit result could incur fines and other penalties in addition to lost business caused by a damaged reputation.
Types of Compliance Audits
There are several types of audits that could be relevant to your business.
- Health Insurance Portability and Accountability Act (HIPAA) audits ensure personal health information is stored and transmitted in a manner that preserves patient privacy.
- Payment Card Industry Data Security Standard (PCI DSS) audits concern the handling of customer credit card payment information.
- Sarbanes-Oxley Act (SOX) audits evaluate the veracity of public company financial statements, check for data integrity, and ensure the business implements disaster recovery measures such as electronic communications backups.
- System and Organization Controls 2 (SOC 2) audits maintain security standards for cloud businesses.
Like many audits, SOC 2 audits can be costly and time-consuming, but they’re a necessary part of life for cloud-native startups. That’s why DuploCloud created a free SOC 2 compliance checklist: to clarify the process and to help you get to market quickly and securely. Click here to download the checklist for yourself.
What Are the Steps of a Compliance Audit?
If you’re facing one for the first time, you may wonder: “What is a compliance audit composed of?” The exact steps of a compliance audit vary slightly according to the compliance standard being addressed, but the general flow remains the same. Before the audit begins, company representatives (usually in the C-suite and the information technology department) meet with compliance auditors to establish the terms of the audit. In this conversation, the two parties nail down what parts of the company will be evaluated, what materials and personnel the company will need to make available to the auditors, and what they’re looking for with regard to compliance. Auditors may also provide a checklist the organization can use to prepare.
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After meeting with your auditors, the audit starts in earnest. Auditors review internal controls, written policy, and employee adherence. That sometimes requires on-site access to observe workspaces, physical security measures, or other important pieces of infrastructure. Auditors often interview leadership and IT administrators, too. They’ll ask about individual users, access control around new hires and departing employees, and other security concerns. Technical leadership will find this stage of the audit easier if they’ve implemented event log managers, change management software, and other governance, risk, and compliance (GRC) solutions.
When the auditors have reviewed all the necessary material, they’ll compile their findings into a final report and deliver it to company leadership. This report will state whether or not the organization meets compliance standards, note any shortcomings, and provide suggestions for improvement. Finally, the audit report is released to the public.
Who Handles Remediation?
Technical leadership and the C-suite can assign or carry out the remediation process, implementing new tools, controls, and policies as necessary. Some auditors offer follow-ups to check remediation work and validate that it has taken place. This process should be completed within 120 days of receiving the report to demonstrate a timely effort to improve.
What Triggers a Compliance Audit?
Most audits take place when a business opts in to achieve demonstrable compliance, but some can be the result of a security breach, fraud, or random chance.
- HIPAA: The Office for Civil Rights audits a random selection of health organizations once every year. A complaint from an employee can also trigger an audit of that employee’s organization.
- PCI DSS: Businesses opt into audits performed by Qualified Security Assessors. Audits can also be mandated after a breach event.
- SOX: Publicly traded companies must submit to yearly audits by independent auditors.
- SOC 2: Companies hoping to demonstrate continued compliance can opt into yearly audits.
What Are the Penalties for Failed Audits?
If done preemptively, a failed audit is a chance to improve your business before something more serious — such as a security breach — throws everything into chaos. However, falling out of compliance and experiencing a breach can incur significant repercussions. Although some standards, such as SOC 2, primarily affect an organization’s reputation, others carry steep potential penalties.
- HIPAA: Penalties range from $100 per violation to $50,00 per violation, depending on the severity of the breach. The exact amount varies by the number of affected individuals, the financial condition of the company in violation, its history of compliance, and other factors.
- PCI DSS: Payment card brands can levy fines up to $500,000 per incident of breach.
- SOX: Knowingly submitting a report that doesn't meet SOX Act standards carries a fine of up to $1 million and up to 10 years in prison for the executive responsible. Willfully certifying a report that falls short of SOX standards with the intent to mislead ups the fine to a maximum of $5 million and the prison maximum to 20 years. Companies that fail to reach SOX compliance can be delisted from the stock exchange.
- SOC 2: No governing body hands out fines or other penalties, but failing a SOC 2 audit signals to potential customers that your business may not adequately protect their data, losing you business as a result.
On the other hand, being audited can be a boon for business, as it demonstrates clearly the seriousness with which your business treats security, privacy, and financial propriety. If you’d like to reap the benefits of a successful audit with less mental overhead, consider working with DuploCloud. We built our automated cloud deployment platform with rigorous compliance standards in mind, making it faster and easier to make the grade and hit the market. Get in touch today to learn more.
