NECESSICITY OF A LEGAL AUDIT

 

The word Legal audit is made from two words ‘Legal’ and ‘audit’. Legal audit is the process of verification of the documents and records of the company. A legal audit is an incredible source of knowledge. It helps you better understand the reality of your legal position. A thorough Legal audit involves comprehensive review of a company’s agreements, policies and procedures, and other legal strategies to be followed for better and smooth administration.

A litigation audit will often focus on making sure due diligence procedure are in place and developing processes to make sure existing legal processes are as efficient as possible.

WHY IS LEGAL AUDITING IMPORTANT?

Legal Audit reduces the risk of a company getting penalized, prosecuted or barred due to any drawback in the documents, policies or operations. It will give an insight into how much a company is following the company laws set by the government and is it safe from any legal allegation.

Now the question arises, what sort of things that need close monitoring besides financials and tax part of the business. The same is very subjective and largely depends upon the business modalities of the respective businesses. However, there are certain things that largely apply to each and every business; be it a small scale or large scale, start up or established company.

Legal Audit reduces the risk of a company getting penalized, prosecuted or barred due to any drawback in the documents, policies or operations. It will give an insight into how much a company is following the company laws set by the government and is it safe from any legal allegation.

Now the question arises, what sort of things that need close monitoring besides financials and tax part of the business. The same is very subjective and largely depends upon the business modalities of the respective businesses. However, there are certain things that largely apply to each and every business; be it a small scale or large scale, start up or established company.

1. Contract/Agreement/Documentation Review

Any business day in and day out, enters into one or more agreement with their vendors, employees, business partners, channel partners inter alia. All such agreements are required to be updated and upgraded with the change in practice or personal experience. It cannot be denied that many times businesses do not have any agreements or contracts ready with them and whenever any new transaction comes; the company needs to invest time and efforts negotiating the agreement from scratch. Thus it is not only imperative to get the contracts reviewed/audited; but also there is need to evaluate the vacuum and need of certain agreements absence of which may have exposed the business at risk. Time and resources spent on such audit of Contracts / Agreements can save Corporations and Businesses from several legal issues.

2. Regulatory Compliances:

Regulatory compliances are another domain that need to be introspected and timely reviewed to ensure that the business are in compliant with the applicable rules and regulations governing the same.

 3. Litigation matters:

It is also important to make sure that all litigations with respect to the businesses are managed properly and the same are aligned with your expectations with the outcome.

Moreover, it is imperative to note that many times company faces issues pertaining to recovery of unpaid dues and thus it would be right time to analyze pending dues from various entities and get the groundwork done with respect to strategizing the legal actions to be taken for such recovery under Insolvency and Bankruptcy Code, 2016

4. Domain name issues and other common law rights:

In this era of digitization, every business is now online rejoicing the power of worldwide web. However, there are certain entities that take undue advantage of the reputation and goodwill of the established business and they purchase a domain name similar to your company’s domain name and ride on your established goodwill and divert or attempt to divert your consumers to their website. Thus one part of legal audit is to ensure that you have adequate domain name registered for your business, products and services.

WHAT SHOULD BE AUDITED AND HOW?

A securities audit or a litigation audit will often focus on making sure due diligence procedures are in place and developing processes to make sure existing legal processes are as efficient as possible.

Most companies should have a legal audit in one or more major areas of their business every three to five years. However, if you have recently encountered a major issue that led to litigation or some type of regulatory action, a legal audit may be needed to make sure there are no other potential issue/risk hidden in your files or processes.

WHAT HAPPENS AFTER LEGAL AUDIT IS CONDUCTED ?

A Lawyer can provide guidance and support to reduce any issues found. You can contact your attorney to provide the guidance, sound advice as well as assistance.

After Legal audit, the audit team will provide list of findings and recommendations. Audit team suggest documents, due diligence and write remarks which are necessary to fulfill the risk involved.
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