Compliance audit definition
/What is a Compliance Audit?
A compliance audit is an audit engagement in which the goal is to determine whether an organization is adhering to the terms of a contract or certain rules and regulations. Regulatory agencies may use compliance audits to see if a business is complying with the terms of its operating license. These audits are always performed by outside auditors, who deliver a final report on their findings following the completion of all field work.
Types of Compliance Audits
For example, a compliance audit could be targeted at:
Ensuring that the terms of a bond indenture are being followed
Ensuring that the calculation and payment of a royalty are correct
Verifying that workers’ compensation pay is being properly reported
Example of a Compliance Audit
Greenfield Medical Clinic provides patient services and receives reimbursement from government health programs, including Medicare and Medicaid. To ensure it maintains eligibility and continues to receive government funding, Greenfield Medical Clinic must follow specific government healthcare regulations regarding patient care documentation, billing practices, patient privacy, and security protocols outlined under the Health Insurance Portability and Accountability Act (HIPAA).
The clinic engages an external audit firm, Reliable Audit Partners, to perform a compliance audit to determine whether Greenfield Medical Clinic is fully adhering to these regulations. The goal of this compliance audit is to assess whether the clinic is operating in accordance with government program requirements, contractual obligations, and HIPAA regulations.
The auditors from Reliable Audit Partners begin the compliance audit by holding an initial meeting with the clinic's management team to outline the audit objectives, scope, and procedures clearly. They explain the primary areas that will be reviewed, including billing accuracy, patient record documentation, HIPAA privacy measures, security protocols, employee training programs, and internal control processes.
Next, the auditors collect various documents and evidence from the clinic. They request patient medical records, billing and reimbursement claims, internal policies and procedures manuals, HIPAA training logs, privacy breach incident reports, employee certifications, and prior compliance reports, if available.
Throughout the audit, the auditors carefully review selected medical records to ensure patient documentation accurately reflects the services billed. They cross-check claims submitted to Medicare and Medicaid against patient visit notes and medical services provided, verifying that no improper billing or fraudulent claims occurred. The auditors interview clinical and administrative personnel, assessing their awareness and understanding of regulatory requirements and internal control procedures.
Additionally, auditors perform thorough evaluations of Greenfield Medical Clinic’s adherence to HIPAA requirements. They inspect patient privacy policies, confirm secure handling of patient data, verify electronic health records' security, review system access controls, and examine logs of security breaches or unauthorized data access incidents.
Upon completing their review, the auditors prepare a detailed report summarizing their findings. The report outlines specific instances of compliance as well as any discovered deviations or violations, such as incomplete patient records, billing errors, insufficient HIPAA training, or weak security protocols. For example, the auditors may highlight instances where employees lacked proper HIPAA training or document certain billing errors resulting from incorrect medical coding practices.
Finally, Reliable Audit Partners presents their comprehensive compliance audit findings to Greenfield Medical Clinic’s management and stakeholders in a formal meeting. The report includes recommendations for corrective actions, timelines for remediation, and guidance on enhancing internal controls and staff training to strengthen compliance in the future.
By performing this compliance audit, Greenfield Medical Clinic can proactively identify areas where they may not fully comply with healthcare regulations or contract terms. The clinic can then promptly address these issues, mitigate potential regulatory risks, avoid financial penalties, and maintain good standing with government healthcare programs and contractual partners.