Regulatory Audit Definition: What It Is, Scope & Examples

A regulatory audit (or regulatory compliance audit) is an independent assessment of whether your organisation is following the laws, rules and standards that apply to it. Auditors examine real processes, controls and records across areas such as finance, data protection, safety and transport to verify that policies exist and operate effectively. The goal is simple: confirm compliance, uncover gaps before they attract fines or disruption, and agree corrective actions that reduce risk.

In this guide you’ll get a clear definition, the purpose and scope, who conducts regulatory audits and when they apply. We cover audit types, the step-by-step process, evidence and testing, deliverables, benefits and risks. With practical examples—including dangerous goods transport (IATA, IMDG, ADR, RID)—prep checklists, and how regulatory, statutory and internal audits differ, you’ll be ready to approach your next audit with confidence.

Purpose and objectives of a regulatory audit

The purpose of a regulatory audit is to provide independent, evidence‑based assurance that an organisation meets the laws, regulations and internal policies that govern it. Beyond pass or fail, a regulatory compliance audit reduces risk and improves operations by highlighting gaps, agreeing corrective actions, and producing a formal report or opinion that regulators, boards and customers can rely on.

Legal assurance and risk mitigation: Avoid fines, sanctions and licence issues.
Objective evidence for stakeholders: Build trust with regulators, customers and boards.
Control effectiveness: Validate design and operating effectiveness of key controls.
Early detection: Surface non‑compliance and provide root‑cause insights.
Actionable follow‑up: Define remediation plans and track accountability.

What a regulatory audit covers (scope and criteria)

Scope defines the boundaries of the review—processes, entities, locations and period—while criteria are the rules and standards the auditor tests against. Expect auditors to trace how policies translate into day‑to‑day controls and verify they operate effectively across finance, data protection, safety and operations, including relevant IT systems and third parties.

Scope – processes and controls: Finance, privacy/security, and safety/operations.
Scope – evidence and records: Policies, procedures, logs, training, incident reports.
Scope – technology: IT systems and data flows; user access and change control.
Scope – people and partners: Competence, authorisations, and outsourced providers.
Scope – footprint: Sites/jurisdictions included and the audit period.
Criteria – laws and guidance: Applicable regulations, regulator guidance, licences and permits.
Criteria – standards/frameworks: ISO/IEC 27001, SOC 2, PCI DSS, SOX, GDPR, HIPAA, OSHA, and sector rules (e.g., IATA, IMDG, ADR, RID).
Criteria – internal obligations: Corporate policies, contracts and SLAs.

Who conducts regulatory audits and when they apply

A regulatory audit is usually performed by an independent, third‑party auditor to provide objective assurance, and in some cases by the regulator itself. Internal audit teams often run readiness or “pre‑audit” reviews, but these do not replace the independent assessment. Audits apply when laws, licences or industry frameworks require formal attestation, when contracts demand it, or when risk or incidents trigger targeted checks.

Who conducts them: Independent accredited firms; supervisory authorities/regulators; internal audit for readiness.
When they apply: Statutory or licence obligations (e.g., SOX for listed firms); sector/contractual demands (e.g., SOC/ISO for customers); threshold‑based requirements (e.g., PCI DSS Level 1 for >6m transactions annually); routine cycles (often annual); event‑driven (breaches, new markets, mergers).

Types of regulatory and compliance audits

Regulatory audits span multiple frameworks and sectors. Some are mandated by law or licences; others are customer or market expectations that demonstrate control maturity. Knowing which regulatory compliance audit applies helps you prioritise scope, evidence and resources, and avoids treating every framework the same.

SOX (financial reporting): Controls over financial statements for public companies.
SOC 1 / SOC 2 (assurance reports): Service organisation controls for finance (SOC 1) and Trust Services Criteria (SOC 2).
ISO/IEC 27001 (information security): Certification of an ISMS against international standards.
PCI DSS (cardholder data): Payment card security requirements for merchants and processors.
GDPR (data protection): Privacy compliance for EU/UK personal data processing.
HIPAA (health data): Safeguards for protected health information.
OSHA/EPA (H&S and environment): Workplace safety and environmental compliance.
FINRA/FISMA/IRS/CMS (sector rules): Financial services, government information security, tax and healthcare programme audits.

Regulatory audits in dangerous goods transport (IATA, IMDG, ADR, RID)

When you move hazardous materials, the stakes are high. A regulatory audit in dangerous goods transport checks that every step—from identification to handover—meets mode-specific rules: IATA for air, the IMDG Code for sea, ADR for road and RID for rail. Independent auditors (or competent authorities and carriers) assess whether your policies, controls and people are keeping shipments safe, legal and moving without delays, with particular scrutiny on high‑risk items like lithium batteries and infectious substances.

Identification and classification: Correct substance identification and risk classification against the applicable modal rule set.
Packaging and containment: Use of approved packaging and packing instructions suitable for the mode and substance.
Marks, labels and placards: Accurate application and visibility throughout handling and transit.
Documentation and records: Complete, consistent transport documentation and retention of audit‑ready evidence.
Handling, segregation and stowage: Safe loading, separation and securing in line with IATA/IMDG/ADR/RID provisions.
Training and competence: Up‑to‑date role‑based training and competency records, including DGSA support where applicable.
Incident readiness: Procedures for emergencies, reporting, corrective actions and continual improvement across multi‑modal interfaces.

The regulatory audit process, step by step

Although frameworks differ, most regulatory audits follow a predictable lifecycle that moves from planning to evidence, through testing, to reporting and follow‑up. Understanding the flow helps you line up the right people and artefacts at the right time and avoid last‑minute scrambles that slow the audit or create avoidable findings.

Plan and scope: Agree objectives, scope, locations, entities and period under review. Confirm the criteria (laws, licences, frameworks and internal policies) and the audit timetable and contacts.
Readiness and requests: Auditors share a checklist/request list. You assemble policies, procedures, records and prior reports in a secure workspace and brief process owners.
Walkthroughs and interviews: Process owners explain how controls operate day‑to‑day. Auditors use inquiry and walkthroughs to validate understanding of people, processes and systems.
Control testing and observation: Auditors test design and operating effectiveness using inspection of evidence, observation/shadowing and re‑performance where appropriate.
Issues management: Queries are resolved in real time; preliminary gaps are discussed, with context and mitigating activities captured to avoid misstatements.
Reporting and sign‑off: Work papers are reviewed, and a draft report/opinion or certification is issued for management comment before final sign‑off by an appropriately qualified auditor.
Remediation and follow‑up: Actions are agreed, owners and dates set, and remediation is verified in a follow‑up cycle to demonstrate continuous improvement.

Evidence, sampling and testing methods auditors use

In practical terms, the regulatory audit definition is underpinned by the quality of evidence you can produce. Auditors need reliable, contemporaneous proof that controls exist and operate as stated. Expect to provide approved policies and procedures, system configurations, access and change logs, approvals, tickets, training records and incident reports mapped to the period in scope. Organise submissions against the request list; where possible, enable audit logs and retain them for at least 366 days. Share evidence securely; if screen‑shares are recorded to capture screenshots, agree boundaries up front. Remember: if it wasn’t documented, it doesn’t exist.

Inquiry and walkthroughs: Interviews with process owners to confirm understanding of processes and controls.
Inspection/examination: Review of documents, logs, configurations and artefacts to evidence operation.
Observation/shadowing: Watching controls operate live to collect timely evidence.
Re‑performance: Independently replicating a control or check to verify results.
Single‑instance tests: For periodic controls (e.g., annual policy reviews).
Random sampling: Selecting items across the audit period for recurring controls (e.g., employee acknowledgements).
Expanded samples on exceptions: Additional testing when deviations are identified to assess extent and impact.

Audit deliverables and outcomes

A regulatory audit concludes with formal deliverables stakeholders can rely on: a report, opinion or certification, and a clear record of issues and actions. Drafts are reviewed by management before final sign‑off by the qualified auditor.

Final report: Scope, criteria, approach and results, written in plain language for stakeholders.
Opinion or certification: For example, SOX/SOC opinions or an ISO 27001 certificate, with any noted exceptions.
Findings log: Each issue mapped to criteria, with evidence, risk, and priority.
Management responses and action plan: Agreed remediation, owners, target dates, and any compensating controls.
Evidence tracker and follow‑up: Closure of requests plus a plan to verify remediation in the next cycle.

Benefits of conducting regulatory audits

Regulatory audits do more than satisfy oversight; they surface risks early, standardise good practice and prove control effectiveness to boards, customers and regulators. The result is fewer surprises, smoother operations and evidence you can use to prioritise investment, strengthen governance and drive continuous improvement.

Legal and financial protection: Avoid fines, penalties, licence issues and costly remediation.
Trust and market access: Independent assurance builds confidence with regulators and clients; often required for contracts or certifications.
Operational efficiency: Streamline processes and reduce rework and delays by fixing root causes.
Better decisions: Objective findings focus spend on the highest‑risk gaps and needed training.
Accountability and culture: Clarify ownership, timelines and metrics for remediation and embed compliance discipline.

Common challenges and risks to watch for

Even well-prepared teams hit recurring friction points that delay fieldwork or magnify findings. Anticipate these challenges early, assign owners, and build controls that leave an evidence trail as you work—not after the fact.

Resource strain and scope creep: Audits are time‑intensive; unclear scope expands requests and timelines.
Complex, evolving rules: Multi‑jurisdiction requirements change frequently, increasing interpretation risk.
Weak evidence hygiene: Missing approvals, incomplete logs, or retention under 366 days undermine tests.
Manual controls and missed cycles: Periodic reviews slip (e.g., quarterly access checks done late).
Third‑party dependencies: Vendors lack attestations or proof, creating external compliance gaps.
Training and competence gaps: Out‑of‑date or incomplete records, especially in high‑risk areas like DG.
Access and change control issues: Excessive privileges or undocumented changes fail ITGC testing.
No single point of contact: Slow responses and miscommunication inflate auditor follow‑ups.
Insecure evidence sharing: Uncontrolled screenshots or exports create privacy and security exposure.
Unmanaged deviations: Sampling exceptions aren’t quantified, contextualised or remediated promptly.

Regulatory audit vs statutory audit vs internal audit

These terms are often conflated, but they serve different purposes. A regulatory audit (often called a compliance audit) independently verifies adherence to external laws, regulations or frameworks, whereas a statutory audit is the legally required audit of financial statements. Internal audit is an in‑house assurance function that tests and improves controls and readiness throughout the year.

Regulatory audit (compliance): Independent or regulator‑led; tests against specific rules/frameworks (e.g., SOX, ISO 27001, PCI DSS, GDPR); outputs a report/opinion/certification; required by law, licence or contract, or after incidents.
Statutory audit (financial statements): Legally mandated; external auditors opine on the accuracy of the accounts and, for listed entities, related controls over financial reporting.
Internal audit: Performed by the organisation; assesses governance, risk and controls against policies and processes; identifies gaps and prepares the business for external/regulatory reviews; not a substitute for independent assurance.

Frequency, triggers and timelines

How often a regulatory audit happens depends on the rule set, your sector and your obligations to regulators and customers. Many organisations schedule a formal compliance audit on an annual cycle, with additional reviews when required by law, licences or contracts. Timelines span planning, fieldwork, reporting and remediation; duration varies with scope, number of sites and availability of evidence and people.

Routine cadence: Annual or periodic cycles for mandated programmes (e.g., SOX financial reporting; ongoing SOC/ISO programmes).
Threshold triggers: Volume or risk thresholds that elevate requirements (e.g., PCI DSS Level 1 for entities processing over 6 million card transactions per year).
Contractual demands: Customer and partner attestations tied to bids, renewals or onboarding.
Regulator‑led reviews: Supervisory authorities may initiate targeted or full‑scope audits.
Change‑driven checks: Organisations often commission audits after system changes, acquisitions or entering new jurisdictions.
Typical timelines: Short, single‑process reviews complete faster; multi‑framework, multi‑site audits run longer across the full audit cycle.

What to prepare: evidence and documentation checklist

Strong preparation turns fieldwork into confirmation rather than investigation. Build a single, read‑only “audit pack” mapped to the request list, with dated, authorised copies and secure access. Wherever possible, include system‑generated logs for at least 366 days to support sampling over the full period in scope.

Governance and scope: Latest policies and procedures, register of applicable laws/standards, licences and permits, org chart/RACI for control ownership.
Control design and SOPs: Process maps, control descriptions, checklists/templates, change management and access control standards.
Operating evidence: Approvals, tickets and work orders; access reviews; change records; configuration baselines; audit logs and monitoring outputs.
People and competence: Role‑based training matrices, completion records and assessments; certificates for regulated roles; briefing records for policy updates.
Risk and incidents: Risk register with owners and ratings; incident/near‑miss logs, investigations, corrective and preventive actions (CAPA).
Third parties: Contracts and SLAs, due‑diligence questionnaires, external attestations (e.g., ISO/SOC where relevant), performance and exception reports.
Prior audits and follow‑up: Previous reports/opinions, management responses, remediation tracker with status, evidence of closure.
Privacy and records: Data inventories, retention schedules, key consents/notices, exceptions and disposal certificates (where applicable).
Dangerous goods (where applicable): Substance identification/classification records, packaging/containment checks, marking/labelling/placarding verifications, handling/segregation/stowage records, transport documentation, training/competence logs and DGSA oversight reports.

Pro tips: name files consistently, timestamp and version them, cross‑reference each artefact to the specific request/control, and agree a secure evidence‑sharing method up front.

Examples and scenarios across industries

The regulatory audit definition plays out differently by sector, but the essentials are the same: independent testing against specific rules, evidence of control operation, and a formal report with actions. These short scenarios show what regulators and independent auditors typically look for, and the outcomes organisations can expect.

Public company (SOX): Audit of controls over financial reporting, including approvals, access and change management. Outcome: external opinion with any deficiencies and corrective actions.
Broker‑dealer (FINRA): Review of AML and cybersecurity governance, surveillance evidence and training records. Outcome: findings logged with remediation timelines.
SaaS provider (SOC 2 / ISO 27001 / GDPR): Testing of security controls against Trust Services Criteria, ISMS scope/evidence, and privacy practices. Outcome: SOC report or ISO certificate with noted exceptions.
Retail/e‑commerce (PCI DSS): Assessment of cardholder data protections, vulnerability management and access controls. Outcome: compliance report/attestation and remediation plan.
Healthcare (HIPAA): Verification of safeguards around patient data, incident response and business associate oversight. Outcome: audit report with risk‑based actions.
Government contractor (FISMA): Evaluation of information security controls and documentation against federal requirements. Outcome: compliance assessment and tracked remediation.
Manufacturing/operations (OSHA/EPA): Checks on safety procedures and environmental records. Outcome: corrective actions to address non‑conformities.
Logistics and carriers (IATA/IMDG/ADR/RID): Dangerous goods audit of classification, packaging, marking/labelling, documentation, handling and training/DGSA oversight. Outcome: transport compliance confirmed, with targeted fixes for any gaps (e.g., lithium batteries).

Common findings and practical remediation tips

Across frameworks, the audit “gotchas” are remarkably consistent: policies don’t match practice, evidence is thin, and periodic controls slip. Whether you’re being tested against SOX, ISO 27001, PCI DSS, GDPR, HIPAA, OSHA or transport codes like IATA/IMDG/ADR/RID, expect auditors to focus on whether controls operated on time, were properly approved, and are supported by reliable records.

Out‑of‑date or misaligned policies: Documents don’t reflect the way work is actually done.
Weak evidence hygiene: Missing approvals/logs, or retention set under 366 days undermines testing.
Access control issues: Excessive privileges, stale accounts, or late access recertifications.
Change management gaps: Unapproved or poorly documented changes; absent test/rollback evidence.
Training lapses: Overdue, role‑mismatched or incomplete records; DG training or DGSA oversight gaps.
Third‑party blind spots: No recent SOC/ISO attestations or incomplete due diligence.
Incident management shortfalls: Inconsistent logging, delayed notifications, weak lessons learned.
Data/record inconsistencies: Incomplete inventories or mismatched records versus reported scope.
Dangerous goods errors: Misclassification, packaging/marking/labelling defects, documentation mismatches, or missing segregation/stowage evidence.
Refresh and align policies: Update, version‑control and train; tie each policy to procedures and controls.
Build an evidence register: Map artefacts to requests/controls; enable audit logs and retain ≥366 days; share securely.
Automate periodic controls: Use ticketing and calendarised reminders so reviews happen within the period.
Tighten access governance: Enforce least privilege, rapid de‑provisioning and timely access reviews.
Gate change control: Require approvals at pull‑request/release, maintain config baselines and test records.
Strengthen vendor oversight: Collect current attestations, track SLAs and risks with owners and dates.
Exercise incident response: Drill, capture timelines, document CAPA and verify closure.
Dangerous goods controls: Standardise classification/packing checklists, two‑person verification for labels/docs, maintain a training renewal tracker, and schedule DGSA spot audits.

Best practices to streamline your next audit

Make audits predictable, not painful. Treat the regulatory audit as a managed project with clear ownership, repeatable workflows and audit‑ready evidence. Build controls that produce documentation as they operate, then use standardised tooling and playbooks so fieldwork becomes confirmation rather than discovery.

Name one accountable lead: Set a RACI, contacts and escalation paths.
Lock scope and criteria early: Keep a live request tracker and weekly checkpoints.
Map controls to rules: Maintain a control‑to‑criteria matrix and evidence index.
Harden evidence hygiene: Enable audit logs and retain them for at least 366 days.
Automate periodic controls: Ticket, reminder and approval workflows at source systems.
Standardise templates: SOPs, checklists and sampling packs for consistent submissions.
Run a pre‑audit walkthrough: Fix quick wins and draft management responses in advance.
Secure evidence sharing: Use controlled portals; avoid email attachments and unmanaged exports.
Coach interviewees: Align on process storyboards; keep answers factual and consistent.
Tame third‑party risk: Collect current SOC/ISO attestations, SLAs and compensating controls.
Time‑box Q&A: Assign owners and due dates; close every auditor query.
Capture lessons learned: Update playbooks, training and controls for continuous improvement.

Training and competence: why people and processes pass audits

Audits are passed by competent people running well‑designed processes. Beyond documents, independent auditors test whether staff know, follow and can evidence the controls they own. They look for role clarity, current role‑based training, mandated certifications where applicable, and proof that learning translates into consistent behaviour via interviews and observation. In dangerous goods operations, that means up‑to‑date DG training for each function and documented DGSA oversight, supported by reliable records of classification, packing, marking and documentation.

Role‑based training matrix: Completions, assessments and renewals.
Authorisations and sign‑offs: Regulated roles with supervisor competence attestation.
Living procedures: Version‑controlled SOPs, drills, and lessons learned feeding CAPA.

Frequently asked questions about regulatory audits

Here are concise answers to the questions teams ask most when planning or facing a regulatory audit. Use them to align expectations across management, process owners and auditors, and to keep your regulatory audit definition practical and outcome‑focused.

What is a regulatory audit? Independent check against laws, regulations and policies.
Who performs it? Third‑party auditors or regulators; internal audit is preparation.
How often? Commonly annual; also triggered by contracts, thresholds, incidents or change.
What do you get? A report, opinion or certification, plus agreed actions.
What evidence counts? Policies, approvals, logs, training records, incidents and vendor attestations.
Dangerous goods transport? Audits test IATA, IMDG, ADR and RID compliance end‑to‑end.

Key standards and regulators to know (UK and international)

Knowing which standards and supervisory bodies apply helps you map obligations to controls and evidence. Most organisations sit under a mix of cross‑industry frameworks plus sector or mode‑specific rules, and may be reviewed by independent auditors or by a competent authority.

International frameworks and standards: ISO/IEC 27001 (information security), SOC 1/SOC 2 (AICPA assurance reports), PCI DSS (PCI Security Standards Council), GDPR (data protection), and SOX (financial reporting).
Health, safety and environment: OSHA (workplace safety) and EPA (environmental compliance) requirements frequently drive audit programmes.
Public sector and healthcare (US examples): HIPAA (health data), CMS (Medicare/Medicaid rules), FISMA (government information security), and IRS (tax).
Financial services oversight: FINRA (US broker‑dealers), FINMA (Swiss financial supervision), and PCAOB oversight related to external audit quality.
Dangerous goods transport codes: IATA (air), IMDG Code (sea), ADR (road) and RID (rail) set the criteria auditors test against for hazmat compliance; in the UK, air transport oversight includes the Civil Aviation Authority (CAA) for relevant approvals and enforcement.

Key takeaways

Regulatory audits provide independent proof that your controls meet required laws and standards, while revealing gaps early so operations stay safe, efficient and trusted. Define scope and criteria clearly, maintain strong evidence hygiene, and keep people competent—especially for dangerous goods—so fieldwork validates what already works rather than uncovering surprises.

Clear purpose: Meet legal duties, cut risk, and build stakeholder trust.
Scope + criteria: Pin down processes, period, sites and the exact rule set.
Evidence-first: If it isn’t documented, it doesn’t exist; retain logs ≥366 days.
Cadence + triggers: Usually annual, plus contract, threshold or incident-driven reviews.
Common pitfalls: Training gaps, weak access/change control, thin third‑party assurance.
Improve continuously: Track remediation, automate periodic checks, standardise templates and run pre‑audits.

For expert dangerous goods training and audit‑readiness support, speak to Logicom Hub.