The Importance of Formally Documented Policies and Procedures

Organizations take different approaches when it comes to documenting their policies and procedures. Some prioritize keeping them well-documented and easily accessible to employees at all times. Others may only recognize their importance when planning and preparing for an audit as they conduct an extensive review of their existing documentation to determine if they meet audit guideline requirements. Meanwhile, there are companies that overlook or neglect the need for formal policies and procedure documentation altogether. 

However, documenting clear, comprehensive, and updated policies and procedures that accurately describe your company’s internal processes is essential not only for audit readiness, but for ensuring operational efficiency and consistency across your organization.  

The Importance of Policies and Procedures Documentation 

Formally documented policies and procedures significantly enhance an organization's operational competence by providing a clear framework for guiding internal processes. They notably play a crucial role in effective employee training, serving as a reliable resource that supplies employees with clear direction on how to execute their jobs sufficiently, further streamlining and strengthening operations.  

Policies and procedures documentation allows for a stronger internal control framework, and management relies on this framework to ensure that the organization's objectives are being met. Formal documentation also helps businesses stay consistent and organized when management needs to make critical and timely decisions.  

In addition to internal controls, thorough policies and procedures documentation assists with risk management and compliance with regulations. Companies who prioritize documenting formal policies and procedures maintain a better understanding of their risk and security posture and are better prepared for audit success.   

How Auditors Use Policies and Procedures Documentation 

Many auditors and compliance professionals consider policies and procedures documentation to be operating tools that are essential and required for standard audits and assessments. Having formal, well written policies and procedures that detail an organization’s internal processes helps auditors when assessing risk and control points and in performing any other type of compliance evaluations. It allows auditors to better understand how a company operates on a deeper level, which ultimately leads to more comprehensive and accurate findings.  

More specifically, auditors use policies and procedures documentation to:  

• Discover current control environments
• Evaluate current risk management practices 
• Identify areas for further tests and assessments
• Evaluate regulatory compliance 
• Report findings of non-compliance or risks 
• Recommend areas of correction or improvement 

Having any policies and procedures documentation inventory in practice is a good start, but it’s not enough to ensure a smooth and successful audit. Your documentation must be comprehensive, up to date, and well-maintained in order to ensure accuracy, consistency, and compliance with audit requirements. 

Best Practices for Documenting Policies and Procedures 

When documenting and managing formal policies and procedures, it is important to keep them as concise and equally comprehensive as possible. It is also important to keep them easily accessible and to raise awareness and encourage their use throughout the organization.

Here are some helpful tips for maintaining formal policies and procedures documentation:

1. Identify and assign policy owners
   Policy owners are responsible for crafting, reviewing, and approving their assigned policy documentation to ensure they accurately reflect current business standards and processes.
   
   
2. Evaluate existing documentation
   Review your existing documentation inventory at least annually to identify gaps, errors, and other opportunities for improvement.  Make a plan for correcting outdated, irrelevant, or incorrect documentation information.
   
   
3. Update documentation as needed
   Proactively update documents to adapt appropriately and in a timely manner as circumstances evolve. Promptly make employees aware of updated policies and procedures so they can apply any necessary changes to their processes accordingly.
   
   
4. Use consistent formatting and style
   Use policy and procedure documentation templates to ensure consistency. Establish and maintain a standardized structure, tone, format, and style across all documents.
   
   
5. Ensure documentation is accessible
   Maintain document accessibility to ensure they are readily visible and available to all employees. Restrict edit-access as needed and establish a process for tracking and recording changes and versioning history of all documents.
   
   

Building a Strong Foundation for Compliance and Operational Success 

Policies and procedures serve as the foundation for a company’s entire operations and help ensure consistency, efficiency, and compliance. Beyond just meeting audit and compliance requirements, well-documented policies and procedures provide the framework for internal processes by supporting employee training and reinforcing a strong culture of accountability.  

Regularly reviewing and updating documentation to reflect current business operations, standards, and protocols is essential for maintaining compliance and operational success. By taking a proactive and thorough approach to managing policies and procedure documentation, your organization can improve audit readiness, reduce risks, and streamline overall business performance.  

If you’re ready to build your compliance roadmap, explore Schellman’s suite of services to see how we can help guide you through the process. In the meantime, continue strengthening your compliance strategy and learn more audit readiness tips with these helpful resources: 

• Tips for Creating an Effective Culture of Compliance  
• 3+ Things You Can Do Now to Prepare for Your Annual Compliance Cycle  
• Preparing for Your Audit: 3 Mindsets to Have