Compliance test - this is a procedure that checks whether an organisation complies with the internal procedures it has established. It is carried out as part of the audit work. Data tests are conducted by an independent auditor, who verifies, among other things, whether in simulated scenarios, employees and managerial staff of the company are able to react in accordance with their internal procedures. If sufficient procedures are detected and available to the company, the auditor may refrain from making a comprehensive report. However, if the activities in question are negatively assessed, they will have to be reported to the institutions concerned. All information is collected from the employees of the company - so that the given procedures are tested as if on a living organism.
Procedure of compliance testing
Compliance testing can be carried out using mathematical criteria or chemical tests, depending on the test subject. Well, auditors can control production lines or e. g. products produced by given production lines. These may be products for which quality standards require testing with chemical apparatus or appropriate mathematical models .
Apart from the variety of tests carried out during the compliance test, the following steps, among others, are the most important:
Most often the compliance test can be applied to different types of companies. In particular, they close where compliance with certain standards is required. These are, in particular, industries such as:
- software engineering
- data and communications protocol engineering
- document engineering
- biocompatibility proofing
- electronic and electrical engineering
- medical procedure proofing
- pharmaceutical packaging
- building construction (fire)
All the above-mentioned industries are characterized by the fact that they have appropriate ISO standards, i. e. quality standards. A large number of auditors are required to obtain certificates in the area of control of specific quality standards. Without them, the person's compliance test can be invalidated .
Standardizing compliance test procedures
As mentioned above, the International Organisation for Standardisation (ISO) is responsible for setting international quality standards, which classifies specific values for different types of economic activity. They allow inspectors not only to check whether the manufactured goods meet all standards, but also provide information to consumers about the fact that the goods are safe for them.
Violation of quality standards, in a large number of countries, may result in the non-admission of a given product to the economic market. First of all, the trader introducing such goods may be liable for damages and criminal liability, depending on the damage suffered by the consumer. Therefore, the standards ensure the security of economic transactions.
Examples of Compliance test
- Anti-Money Laundering Compliance Test: Anti-money laundering compliance tests are conducted to ensure that an organization is following all the regulatory requirements related to anti-money laundering. These tests are conducted by an independent auditor and involve verifying whether the organization is using the appropriate procedures and protocols to detect, report, and prevent money laundering activities.
- Regulatory Compliance Test: Regulatory compliance tests are conducted to ensure that an organization is following all the relevant regulations and laws. These tests are conducted by an independent auditor and involve verifying whether the organization is adhering to all the laws and regulations that are applicable in its industry.
- IT Compliance Test: IT compliance tests are conducted to ensure that an organization is secure and compliant with all the relevant IT policies and protocols. These tests are conducted by an independent auditor and involve verifying whether the organization is using the appropriate IT systems and policies to protect its data.
- Data Protection Compliance Test: Data protection compliance tests are conducted to ensure that an organization is protecting its customers’ data. These tests are conducted by an independent auditor and involve verifying whether the organization is using the appropriate data protection measures to keep its customers’ data secure.
Advantages of Compliance test
A Compliance test is a useful tool to assess the effectiveness and consistency of an organization's internal procedures. It is conducted by an independent auditor, who verifies whether the organization is following its procedures through simulated scenarios and data tests. There are several advantages to Compliance testing:
- It helps to ensure that the organization is compliant with all applicable laws and regulations. This in turn helps to protect the organization from any legal or financial penalties.
- It also helps to identify areas where procedures may need to be updated or improved. This ensures that the organization is functioning as efficiently as possible.
- Compliance testing also helps to ensure that employees are following the correct procedures and that they understand the importance of following them. This can help to increase morale and productivity.
- Finally, Compliance testing helps to provide evidence for any audit or regulatory inspections. This helps to ensure that the organization is prepared for any potential scrutiny.
Limitations of Compliance test
The Compliance Test has some limitations which should be taken into consideration when assessing the effectiveness of this procedure. These limitations include:
- The Compliance Test can be time-consuming, as it requires the auditor to simulate a variety of scenarios to test the company’s procedures.
- The Compliance Test is only as effective as the procedures in place within the organisation. If the procedures are inadequate or not in place, the test may not be able to provide an accurate assessment.
- The Compliance Test is only as effective as the employees of the organisation. If the employees are not properly trained or do not follow the procedures correctly, the test may not be able to provide an accurate assessment.
- The Compliance Test may not be able to provide a comprehensive assessment of the organisation’s compliance with external regulations, as it is limited to internal procedures.
- The Compliance Test may not be able to detect certain forms of fraud or other illegal activities, as it is limited to testing the internal procedures.
In addition to Compliance Tests, there are several other approaches related to ensuring compliance with internal procedures. These include:
- Training: Ensuring that employees are well-versed in the organisation’s procedures and protocols is key to successful compliance. Training should include both general knowledge of procedures, as well as specific examples of how to comply in various scenarios.
- Internal Monitoring: Internal monitors are responsible for ensuring that employees are following the correct procedures. They are also tasked with identifying areas of non-compliance, and taking corrective action.
- Auditing: Auditing is an important part of compliance testing. An independent auditor will review the company’s procedures and practices to ensure that they are in line with applicable laws and regulations.
In summary, Compliance Tests are an important part of ensuring compliance with internal procedures. Other approaches such as training, internal monitoring, and auditing are also necessary to ensure that all employees are aware of the procedures and are following them correctly.
- Agosta F., Alvarez F., Galvan S., O'Connor R.V., Mora M (2015) A Compliance Analysis of Agile Methodologies with the ISO/IEC 29110 Project Management Process "Procedia Computer Science" No. 64
- Bedard J. C., Cannon N. H., (2017) Auditing Challenging Fair Value Measurements: Evidence from the Field, "The Accounting Review" - American Accounting Association Vol. 92, No. 4
- Nielsen H. S., (2012) Recent developments in International Organization for Standardization geometrical product specification standards and strategic plans for future work "Journal of Engineering Manufacture" No. 227(5)
- Bedard J. C., Cannon N. H., (2017) p. 81-114
- Agosta F., Alvarez F., O'Connor R.V., Galvan S., Mora M (2015) p. 188-195
- Nielsen H. S., (2012) p. 643-649
Author: Martyna Barłóg