A good internal audit program can help you to maintain compliance with regulations and reduce the risk of fines and penalties. For example, if you’re a licensed medical cannabis producer, your internal audit program should review your records for critical information such as:
In compliance with the Securities Exchange Act of 1934 (the “Act”), the Financial Industry Regulatory Authority (“FINRA”) recently adopted new rules that require brokers, dealers and advisors to implement internal audit controls in order to maintain compliance with the Act. If you take a closer look at a broker’s, dealer’s or advisor’s internal audit control program, you will likely find similar components that relate to compliance, such as monitoring systems, training programs, quality assurance/quality control, and other programs that are intended to ensure brokers, dealers and advisors adhere to the market, laws and regulations. What differentiates one internal audit program from another is that, based on FINRA’s new rules
What do you do when you’re searching the internet for a product and it doesn’t turn up? You visit the manufacturer’s website and ask them. But what about when you’re searching for a product outside of the manufacturer’s website? You go directly to the supplier’s website and ask them. That’s called an “internal audit” and should be used more often.
The word audit evokes different emotions depending on your role in the organization and the context of the audit. Most people know and hate the potential IRS audit, but the audits we’re going to talk about today are welcome (or should be) – proactive internal quality audits. A milder term, also acceptable, is self-esteem. These are independent assessments conducted to determine the effectiveness of the organisation’s risk management, processes and overall governance. How do you know where you’re going if you don’t know where you’ve been – Maya Angelou Internal quality audits are essential to ensure the safety of products, employees, consumers and the environment. If regularly planned and conducted, these audits provide credible, consistent and objective evidence that informs the organization of its risks, vulnerabilities and opportunities for improvement. Ask yourself this question: Do your customers/suppliers trust you to produce reliable, consistent and safe products? Assuming the answer is yes, how sure are you of this and where is the documentation on this? Compliance departments at cannabis businesses are typically responsible for ensuring that the business remains legally compliant with state and federal regulations. This minimum level of compliance is essential to avoid fines and to ensure that permits are not revoked. However, compliance checks rarely cover the basics, exposing cannabis operators to many unnecessary risks. Internal quality audits are essential to ensure the safety of products, employees, consumers and the environment. As a manufacturer of medical and adult products that are ingested, inhaled or otherwise consumed by our friends, family and neighbors, how can you be sure that these products are made safely and consistently? Are you confident that the legal requirements imposed by your state’s cannabis control board are sufficient? Judging by the number of reactions and frustrations in the industry due to the number of regulations, I bet the answer will be no. What issues do internal audits address? Here are some examples:
- Do you work according to management’s plans?
- How effective is your system in achieving your goals? These goals can include the quality of your products, on-time delivery, and other customer satisfaction metrics.
- Is there room for improvement?
- Do you do what you say you do (in your standard operating procedures) and do you have supporting documents (records) to prove it?
- Do you comply with all applicable legal requirements?
Internal audit reveals potential weaknesses. For example, since impartiality is important when conducting internal audits, it may be difficult to find an impartial internal auditor in a small company. If your team is constantly in firefighting mode, you may find it a luxury to take members away from their daily tasks and interrupt ongoing activities to conduct an audit. Some fear that an audit will uncover a whole list of things, since internal evaluations should be more thorough than external ones. However, these self-assessments often reveal problems that have led to operational efficiency improvements in the first place. The resulting laundry list is a proactive tool for taking corrective action in an organized manner and preventing major problems from recurring and new problems from arising. The advantages of internal audits outweigh the disadvantages; not to mention that internal audits are mandated by almost all globally recognized programs, whether voluntary (e.g., ISO 9001 or the ASTM International Cannabis Certification Program) or governmental (e.g., the Internal Audit Program). B. 21 CFR 211 for pharmaceutical products. Internal audit is a catalyst for improving organizational efficiency and effectiveness by providing information and recommendations based on the analysis and evaluation of data and business processes. Other benefits of internal audits are that they give your organization the opportunity to. :
- Ensure compliance with national, international and industry standards, regulations and customer requirements.
- Determine the effectiveness of the system put in place to achieve the objectives set (qualitative, environmental, financial).
- identify areas for improvement
- Comply with legal and regulatory requirements
- Providing feedback to senior management
- Reducing the cost of poor quality
All audit findings must be resolved. This is usually done under the CAPA (Corrective Action, Preventive Action) program. For many people unfamiliar with quality management systems, the term may be new. From 1. In January 2021, this requirement becomes mandatory for all operators licensed to sell cannabis in Colorado. Many other states require CAPA or a similar program. Continuing education units (CEUs) are available through ASTM International’s CAPA training program designed specifically for the cannabis industry. Here are some examples of common audit results that require the use of CAPA:
- Calibration – Production and test equipment must be calibrated to ensure accurate and repeatable results.
- Control of documents and records – Documents and records should be easily accessible but protected from accidental use.
- Supplier Management – Most standards have a variety of requirements for supplier management, including B. include auditing suppliers, monitoring supplier performance, exclusive use of suppliers certified to certain standards, etc.
- Internal Audits – Believe it or not, but since internal audits are mandatory in many programs, it is not unusual to find findings related to internal audits! Internal audit findings may include non-compliance with the audit plan, non-compliance with audit findings, or a lack of qualifications of the internal auditors. Do you need more advice? Last year, members of the ASTM International D37 Cannabis Committee adopted ASTM D8308-21 Standard Guidelines for Auditing Compliance of Cannabis and Hemp Cultivation Operations.
If you still doubt the value of internal audits, given the possibility of an inspector discovering a discrepancy or your own team discovering and correcting it, what would you prefer? Since the fines imposed by many cannabis enforcement units easily exceed $100,000, the answer should be obvious. Internal audits are a valuable tool that you should not be afraid of.This is going to be a bit of a lengthy intro for this blog post as I want to take the time to outline some of the more general issues with internal auditing and how we can improve our programs. Essentially, internal auditing is a method of improving your processes and systems that results in increased internal control and reduced risk of errors and fraud. It can be a very good thing, but it’s not perfect.. Read more about how to evaluate internal auditors performance and let us know what you think.
Frequently Asked Questions
How can you measure the effectiveness of internal audit?
Internal audit programs, internal control systems, or “IAC”, are vital in the financial world to ensure regulators have the appropriate tools to audit financial statements and to detect fraud. In this article, we will explore the tools available to gauge the effectiveness of IAC programs in financial services organizations. Internal Audit is a process that is performed by management and an independent body to verify the effectiveness of business management systems and processes. The purpose of Internal Audit is to ensure that management is performing its duties in a competent and ethical manner, and that all areas of operations are functioning to achieve the required goals.
How does internal audit help an organization?
Internal auditing (IA) is an integral part of all types of organizations, and is a vital support for the management of business. Although the practice of IA is not limited to the public sector, it is primarily used in the private and public sector to monitor the effectiveness of management controls. Every organization, large or small, is plagued by significant issues. Whether the issue is an incompetent manager, a cash crunch, or a complaint from an angry customer, these problems can be difficult to deal with. Internal auditing is a process used by business to deal with these problems before they become too severe to manage. Internal auditing is a process that can help a company understand its past activities, identify any potential problems, and develop a plan for dealing with them.
What are the benefits of an internal audit?
When it comes to accounting, it’s important to know whether everyone is doing his or her job. And it’s equally important that you know how to tell whether or not you are being cheated on. Because while you may be able to trust the front-line staff, you can’t count on the quality of their work. If you don’t have the time, ability, or resources to run an in-house audit, then you might want to consider hiring a third-party auditor. As an owner of a small business (and a cannabis related business to boot!), I know I’m not alone in feeling like all of this internal accounting stuff can just get overwhelming. Internal auditing is just one of those things that we all know to do, but no one has the time or energy to get it done. It’s not like there’s a shortage of things to do, so why would we spend time on something so unimportant? Why not just save our energy and money for something more important?
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