How to Implement an Audit and Compliance Program

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The purpose of an audit and compliance program is to establish an ethical code of conduct, educate employees on this code and ensure its compliance. In addition to establishing an ethical code of conduct, an audit and compliance program involves: training employees on the code of conduct, establishing criteria and procedures for detecting and investigating non-compliance, and establishing criteria and procedures for auditing compliance by both the company and individual employees.

Develop an ethical code of conduct using a committee representing the various functional components of the company to draft the document. A legal review and approval process involving the board of directors, as the final approval authority, is necessary. To be effective, the document must be tailored to the strategic goals and objectives of the company.

Create a position for a corporate compliance officer independent of management. The corporate compliance officer is the "go to" person regarding the code of ethical conduct, including related training for employees, reporting of noncompliance and related investigations, reporting to management and compliance audits. This position must be independent of management and under the authority of the board of directors with reports provided to management as a service similar to the internal audit function.

Establish reporting responsibilities for the corporate compliance officer. The corporate compliance officer will report regularly (i.e., monthly or quarterly) to the president and board of directors concerning any and all activities regarding the code of ethical conduct and corporate compliance program.

Develop training on the ethical code of conduct and the corporate compliance program. The corporate compliance officer is responsible for ensuring that every employee is adequately trained on the ethical code of conduct and the corporate compliance program, including all officers and directors of the company.

Establish criteria and procedures for investigations of non-compliance with the ethical code of conduct. The corporate compliance officer investigates all suspected code violations. All reports are reviewed and evaluated by the president of the company and a representative of the board of directors and must remain confidential. The corporate compliance officer must also implement policies prohibiting any type of retaliation against a person making a report of non-compliance with the ethical code of conduct.

Determine criteria and procedures for auditing compliance with the ethical code of conduct. The corporate compliance officer is responsible for auditing the company's compliance with the ethical code of conduct at least annually, and these audits should include the effectiveness of and compliance with the company's financial controls and procedures.

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