Many in-house lawyers and chief compliance officers over the past 10 years have found themselves, at one time or another, struggling to find common ground with their colleagues in internal audit. Developments such as the passage of the Sarbanes-Oxley Act, the 2008 Department of Justice memorandum on bringing criminal charges against corporations, known as the “Filip Memo,” and the release of the DOJ and Securities and Exchange Commission’s guidance regarding the Foreign Corrupt Practices Act have triggered an expansion of the internal audit and legal and compliance functions. Unfortunately, this has created confusion as to those functions’ respective roles, and, in some cases, led to nonproductive turf wars.

The audit and compliance functions have similar goals, namely, managing risks and ensuring adherence to company policies and procedures and legal and regulatory requirements. However, while internal audit’s role is to objectively test a company’s internal controls and examine its processes, the legal and compliance function is more qualitative, focusing on risk assessments, program design, training and the actual implementation of policies and procedures. The aim of the two functions is similar, but their approaches differ, which can occasionally cause compliance and internal audit to clash. By harnessing the objective analytic skill of internal auditors and combining it with the legal and compliance team perspectives, a corporation can more effectively manage its risks.

Evolution of Internal Audit and Legal and Compliance

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