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​GDPR and Internal Audit​

Auditors can help their organization navigate the compliance risks posed by Europe’s General Data Protection Regulation.​

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Now that the May 25 deadline has passed to comply with the European Union’s (EU’s) General Data Protection Regulation (GDPR), compliance executives may be breathing a sigh of relief. Yet the real compliance work is only beginning. 

GDPR consolidates the EU’s personal data privacy protection laws and redirects the way organizations approach data privacy. It greatly expands the privacy rights of E.U. citizens and residents, and it applies to any organization that does business with those individuals, regardless of its location. Organizations that don’t comply with GDPR face penalties of up to €20 million or 4 percent of annual worldwide turnover, whichever is greater. 

Compliance will require continued focus and effort. Internal audit can help the organization mitigate GDPR compliance risks by identifying ways to improve controls, raising risk awareness, and assuring compliance.

Improving Controls​

Internal audit can help the organization shift from the preparation phase to the implementation phase of GDPR. The regulation specifically requires organizations to focus on these control-oriented topics:

  • Accuracy and quality requires organizations to ensure data is accurate and up-to-date and that individuals can correct their records. 
  • Security and privacy by design requires organizations to document decisions taken to inform EU residents about how their data will be used and restricted. They also must implement technical, administrative, and physical security/privacy controls to mitigate potential harm. 
  • Security safeguards ensure that technical and organizational measures are implemented for privacy and security. 


Internal audit should work with management to identify relevant controls over data entry, assess the accuracy of information and recommend improvements, and strengthen controls that prevent and detect data errors.

Raising Risk Awareness 

The direct risks associated with GDPR relate to potential fines and reputational impact. However, by digging into the regulation’s purpose, internal auditors can see other data protection risks.

Monitoring, Measuring, and Reporting Organizations must have a data protection officer (DPO) to lead privacy and compliance efforts. Among the DPO’s tasks are reporting on compliance monitoring, training staff, and ensuring privacy compliance audits take place. The organization must perform data privacy impact assessments when new technologies and systems are used, provide timely data breach notifications, and report on the use of third-party processors.

Prevent Harm GDPR imposes sanctions and penalties on organizations that process data unlawfully or fail to deploy safeguards. In addition, individuals may request that the organization remove their personal data from automated processing and profiling.

Breach Management Organizations must put processes in place to notify persons no later than 72 hours after they discover a data breach, if it is determined that the breach will result in a high risk of privacy harm to those individuals.

Openness, Transparency, and Notice Organizations must keep data for specific and legitimate purposes and notify persons about how the organization will use their data. Organizations also must inform individuals of safeguards applied when personal data is transferred to a third country.

Individual Participation EU residents may request access to data, obtain a copy of the data held, and withdraw consent to use personal data as long as withdrawal does not result in legal violations. Individuals may object to the use of their data for direct marketing and profiling, and they may contact the DPO for any issue related to processing their personal data.

Internal audit can educate management about potential risks and ways to manage risks in each area. Auditors can communicate relevant information about these risks via informal emails, a departmental newsletter, or meeting with management. 

Assuring Compliance

As new policies and procedures become more mature, internal audit will need to perform regular compliance audits to determine the extent to which the organization is complying with GDPR. Auditors should focus on how the organization manages data to help strengthen privacy and security controls and ensure they are designed appropriately and operating effectively. Auditors will need to assure compliance with key aspects of the regulation and provide early warnings about problems.

Choice and Consent Under GDPR, organizations must allow users to choose how their personal data is used. Also, organizations must document and maintain consents and request parental authorization before collecting a child’s data. 

Legitimate Purpose To ensure data collection is lawful and necessary, organizations can collect only personal data that is needed to achieve the intended purpose. Reviewing and handling requests for further processing, restricting requests for data related to criminal convictions, and documenting situations where the right to object does not apply are all important. Internal auditors can help reduce risk by sampling data collection mechanisms for compliance.

Limitations Organizations may keep data no longer than the period required to support the purposes for which it was collected, and they must erase an individual’s personal data upon his or her request. GDPR permits organizations to retain data meant for archiving purposes in the public interest or for reasons of scientific or historical research. 

Free Flow of Information and Legitimate Restriction This principle includes protections for data transfers using legally binding agreements between public authorities, binding corporate rules, model clauses, and other mechanisms. 

Third-party Vendor Management This principle ensures that organizations gather third-party/vendor guarantees of GDPR compliance along with proof that third parties have the required technical and organizational safeguards. The DPOs of the data controller — organizations or individuals that determine the purposes and means of processing data — must provide written authorizations to use a given processor.

Accountability GDPR’s accountability principle provides a legal basis for processing personal data, establishes the DPO role, and informs citizens and residents of existing privacy rights and safeguards. In addition to overseeing the data protection strategy, the DPO must maintain contact with the supervisory authority and demonstrate compliance.

Internal auditors will need to periodically assess processes and controls for each of these principles to ensure they are designed and operating effectively. Auditors can review a sample of data transfer documentation to look for data that should not be transferred to another organization. They can run reports to look for data that is being kept longer than necessary and review available documentation for any exceptions.

A GDPR Audit Plan

To help the organization maintain compliance, internal audit should include independent GDPR assessments and compliance testing in the audit plan. It can raise executive and board awareness of GDPR noncompliance by highlighting poorly designed or missing controls. Finally, it can identify opportunities to audit common processes across departments. ​

Jan Hertzberg
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About the Author

 

 

Jan HertzbergJan Hertzberg<p></p><p>Jan Hertzberg, CISA, CIPT, is a director at BKD in Chicago.</p>https://iaonline.theiia.org/authors/Pages/Jan-Hertzberg.aspx

 

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