A legal compliance audit is an evaluation of an organization’s operations to determine its compliance with the laws and regulations that apply to its operations.
In Tanzania the audit firms generally are mainly conducting legal audit and compliance. However, Vemma Attorneys having realized that, to ensure strict compliance, legal compliance audit is supposed to be done thoroughly by legal firms. Having realized this gap, Vemma Attorneys provides these services to its clients in order to ensure this gap is covered and our Clients are compliant within the ambits of corporate governance. The audit checklist guides the evaluation process by checking the company’s performance against legal standards and identifying areas where adherence needs to be stricter and compliant. Many areas in companies operations are subject to legal oversight but the major areas an organizational legal audit compliance checklist should cover are labour and employment relations, corporate governance and health and safety.
The labour laws and its regulations arguably are the main area which require a thorough check, not only for the curbed complex involving the latter but also it is considered as a compliance risk involving the relationship of the employer and employees at the workplace. Subsequently on conducting a thorough examination on the human resource practices, there are requisite requirements which needs to be adhered including testing the employment contracts, policies vis a viz the contents of the Employment and Labour Relations Act, 2004 and its regulations such as job description, working hours, salary and fringe benefits, length of the contract, entitled leave, incapacity, illness and sick pay and termination and other labour laws and policies in place to include collective bargaining and trade union practices. The examination should go further to determine the policies in place and if at all the employees acknowledge the existence of such policies by reading and signing and to be more effective the policies are supposed to be displayed at conspicuous place so that each employee can read and understand their existence.
Corporate governance is one key element in improving organization efficiency and growth as well as enhancing investor confidence. Good Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. In order for corporate governance to take part organizations are expected to comply with various governance laws and observe transparency, accountability, ethical code of conduct and sustainability. A legal compliance audit checklist should probe areas of the organization’s corporate governance practices; the examination may look into the appointments of directors, staff employment, procurement, annual general meetings, tax remittances (Corporate Tax, Withholding Tax, VAT, Stamp Duty, Capital Gains Tax) and company returns at the respective registry. For example under the Companies Act, Cap 212 the post compliance requisites after registration include:
To keep a register of your company’s members (shareholders);
To file the company’s Annual Returns in every year;
To annex to the annual returns certified copies of Accounts and Auditors Reports related to the said returns;
A company must hold an Annual General Meeting in every year and keep all its minutes;
A company is required to keep proper Books of Accounts;
To state your company’s incorporation number on any document you deliver to the Registrar for registration;
To notify the Registrar of any changes of the company’s registered particulars kept by the Registrar;
To register any charges created by your company.
In the same sequel corporate governance examination should probe into conducting regulatory review depending on the sector that the company that audit is conducted is falling, like on the banking sector the regulations imposed by Bank of Tanzania (BoT) should be checked to ensure compliance, the same for telecommunications companies under Tanzania Communications and Regulatory Authority (TCRA), Insurance Firms, Brokerage and Agencies under Tanzania Insurance Regulatory Authority (TIRA), for contractors under Contractors Registration Board (CRB), for aviation under Tanzania Civil Aviation Authority, (TCAA) energy sector under Energy and Water Regulatory Authority (EWURA), for transportation both surface and marine under the Surface and Marine Transport Regulatory Authority (SUMATRA) and the same applies for Forest Industry (natural and plantations), bee reserves and bee resources under the semi-autonomous government agency of Tanzania Forest Services Agency (TFS). The examination should went further to audit on the review of contracts including management of contracts to meet the set goals, existing litigation and or, arbitration proceedings as well as employment disputes pending before the court of laws and their consequences or advise on the best alternative dispute resolution to avoid incurring costs and resources.
HEALTH AND SAFETY
Health and Safety is another area of potential compliance risk while conducting compliance audit to ascertain organizational compliance on the health and safety. Organizations are subject to various health and safety laws, policies and directives such as Occupational Safety and Health Authority (OSHA), which distinguish health, and safety that apply to different sectors. The coming into force of Worker’s Compensation Act, which provides compensation for employees injured or incapacitated in the course of employment, all employers are required to contribute to the established Workers Compensation Fund (WCF). Private Sector is supposed to contribute 1% and Public Sector 0.5% of their annual wage bill. The contributions are due on monthly basis. In conducting the audit a checklist that covers the laws under health and safety are paramount to be examined in order to address every compliance risk.
The legal compliance audit not only prevents unnecessary penalties upon spotted incompliant with regulators but has proved to be key element in improving organization efficiency, growth and provide an enabling climate for organization to operate and thrive within the realms of compliant structures.