Navigating the frameworks of corporate accountability involves engaging with two distinct but often interlinked functions: Internal Audit and Compliance. While they share certain characteristics and often intersect in execution, their mandates, responsibilities, and methodologies differ significantly.
Internal Audit is primarily concerned with evaluating and improving organizational processes through independent, objective assurance. Guided by professional standards, auditors examine risks, controls, and efficiency, aiming to enhance business outcomes without directly engaging in operations. Their independence is safeguarded through a unique reporting structure—typically, they report administratively to senior executives such as the CEO, but functionally to the Audit Committee. This separation preserves objectivity.
Compliance, by contrast, operates closer to daily business activities. Typically reporting to leaders like the COO or the Head of Risk, the compliance team is tasked with ensuring that the organization is consistently aligning with applicable laws, regulations, and internal policies. They execute control procedures, investigate breaches, and often serve as the first line of defense in areas governed by regulation. While their scope may be narrower, compliance professionals often perform more granular checks than auditors, sometimes reviewing entire datasets for conformity.
Where Objectives Align
Although distinct, Internal Audit and Compliance share a common goal: promoting ethical, legal, and operational adherence within an organization. This alignment fosters opportunities for synergy.
Both functions demand detail-oriented, rule-abiding professionals who are rigorous in their approach. Collaborative projects, mutual consultations during audit planning, and shared involvement in regulatory examinations are all typical. For instance, when a regulatory inspection looms, both departments play vital roles—Compliance may ensure documentation and controls are in place, while Internal Audit evaluates the readiness and identifies gaps.
It is also practical for auditors to begin their assessments by checking in with compliance colleagues. These conversations can help shape the scope of audits, unearth risk areas that may not be apparent from a purely financial or procedural lens, and ultimately improve the depth and relevance of audit findings.
Potential Pitfalls of Overlap
As organizational boundaries blur, so too do the responsibilities of departments. Auditors must tread carefully to avoid being mistaken for compliance authorities. This misinterpretation can be subtle, but dangerous.
The risk often manifests when auditors are asked to opine on regulatory adherence outside the scope of their formal findings. For example, leaders might seek quick answers about compliance with a new legal requirement or request that auditors verify procedural conformity. While the intent may be benign, responding in these cases can unintentionally shift responsibility and jeopardize the auditor’s independence.
In such moments, the best approach is clear and respectful boundary-setting. It is essential for Internal Audit professionals to remind stakeholders that while they can identify non-compliance through formal audits, the responsibility to ensure compliance lies squarely with management and, ultimately, the governing board. The role of the auditor is to assess, not to enforce or certify.
When Backgrounds Complicate Boundaries
The distinction between roles can become especially blurred when an auditor has a background in compliance. It is not unusual for professionals to transition between the two roles or to hold certifications in both areas. This expertise, while valuable, can become problematic if it encourages overreach.
Consider a meeting scenario where a regulatory topic arises. An auditor with deep compliance knowledge may feel inclined to contribute beyond the scope of their role. However, this well-meaning input can have serious implications. If an auditor inaccurately assures compliance and that assurance later proves false, they may be held accountable for decisions outside their remit.
Even accurate statements can create confusion. When an auditor answers on behalf of the compliance function, it undermines the accountability of that department and muddles the reporting hierarchy. This behavior, however unintentional, dilutes both the authority of the compliance team and the objectivity of the auditor.
Dual Roles in Resource-Limited Settings
In smaller or resource-constrained organizations, it is not uncommon for one individual to handle both Internal Audit and compliance duties. This consolidation, while practical, is fraught with challenges. It compromises the auditor’s independence and creates situations where individuals are asked to assess their own work.
To address these risks, organizations must take deliberate steps. For one, audits of compliance activities should be conducted by someone other than the person responsible for those tasks. This might mean outsourcing audit reviews, or rotating responsibilities with trained staff from other departments.
Additionally, clarity in communication is vital. Those managing dual roles should make it known which hat they are wearing in any given context. The Audit Committee, in particular, should understand that while the auditor may also be responsible for compliance implementation, their oversight should remain strictly focused on the audit function.
A Personal Path Toward Competency
Audit professionals vary widely in their familiarity with compliance issues. Some enter the field with deep regulatory expertise; others may be encountering these topics for the first time. Either path is valid.
New auditors should not feel pressured to master compliance from day one. What matters more is a commitment to learning. Reading regulations, asking informed questions, and approaching the subject with intellectual curiosity can yield significant value. It is often through the process of conducting audits that a deeper understanding of compliance takes root.
More seasoned auditors, even those with extensive compliance knowledge, must avoid assuming they know everything. Overconfidence can be as risky as ignorance. Regulatory environments change rapidly, and nuanced interpretations often matter. By remaining humble, transparent about what they know, and open to learning, auditors can better serve their organizations.
What’s most critical is maintaining professional skepticism. When faced with explanations that seem overly complex or don’t quite add up, auditors should dig deeper. Their role is not to accept things at face value but to investigate, analyze, and report.
Drawing the Line—With Purpose
Successfully navigating the dynamic between Internal Audit and Compliance requires intentional effort. It starts with understanding the scope of each role, then respecting those boundaries in practice. While collaboration is beneficial and often necessary, it should never come at the cost of clarity.
Auditors should be prepared to defer compliance-related questions back to the appropriate department. They must learn to say “I don’t know” when something falls outside their scope, and they should resist the temptation to fill in knowledge gaps that are not their responsibility to bridge.
Organizations, for their part, should support these boundaries. They should resist the urge to consolidate roles unless absolutely necessary and, when they do, ensure systems are in place to protect independence.
Final Take
In the end, strong audit and compliance functions benefit everyone. When roles are clearly defined, and individuals operate within those parameters, the organization is better equipped to identify risks, correct deficiencies, and maintain ethical operations.
Auditors should embrace their role as independent evaluators—not enforcers. Compliance professionals should own their domain and collaborate with auditors as trusted partners. Together, these teams contribute to a well-governed, resilient, and accountable organization.
Whether you’re new to Internal Audit or a seasoned veteran, let this serve as a reminder that your power lies not in doing everything, but in doing your job—thoroughly, ethically, and with integrity. Let the compliance function do its work, and focus on offering clear, evidence-based insights that help drive your organization forward.
FAQs about Audit and Compliance
What is the primary difference between Internal Audit and Compliance?
Internal Audit provides independent assurance on risk and controls, while Compliance ensures daily adherence to laws and regulations.
Can one person handle both audit and compliance roles?
Yes, but it’s not ideal. It compromises independence, so clear boundaries and safeguards must be established.
Why must Internal Audit remain independent?
Independence ensures objectivity. Auditors cannot assess their own work or functions they influence directly.
How do Internal Audit and Compliance collaborate effectively?
They share insights, coordinate during audits and exams, and communicate risks—but maintain separate responsibilities.
What risks arise when auditors take on compliance roles?
It creates confusion, undermines credibility, and can shift responsibility away from management and compliance officers.
How should auditors respond to compliance-related inquiries?
Auditors should redirect such questions to the compliance function to preserve role clarity and objectivity.
What if an auditor has prior compliance experience?
That knowledge is valuable but should not be used to assume current compliance responsibilities or make decisions.
How can auditors grow their compliance knowledge responsibly?
Through ongoing learning, asking questions, reviewing relevant regulations, and applying professional skepticism in audits.