Natural Products Insider

SEP-OCT 2018

INSIDER is the leading information source for marketers, manufacturers and formulators of dietary supplements, healthy foods and cosmeceuticals. Since 1997, INSIDER has been serving the needs of the global nutrition industry.

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38 INSIDER September/October 2018 Risk can be defined in various ways, depending on the context. Generally, risk is considered as the possibility of damage, loss or injury; it's a threat of something potentially going wrong with the activities or organization of the entity or persons concerned. Without a potential adverse consequence occurring, there is no hazard. Audits are one tool of risk assessment. Risk assessment is the process, identifi cation, analysis and estimation of potential relative adverse hazards—whether related to general fi nancial decisions or environmental, ecological, public or human health risk—and what could happen if a hazard occurs. This is generally done using either or both quantitative or qualitative risk analysis tools. Quantitative risk analysis is all about the numbers. The available data is numerical value, structured and statistical, and is used to predict the probability (and acceptability) of a risk event outcome. Risks are scored based on their probability or likelihood of occurring and the impact, should they occur. High-quality data is needed to conduct a quantitative risk analysis, in addition to a well-developed project model and a prioritized list of project risks. Qualitative risk analysis scrutinizes trends. It uses empirical information to create a subjective assessment of risk occurrence. It is an assessment of the probability of a negative event occurring against the potential severity of the risk outcomes (impact), to determine the overall severity of a risk. The word "audit" is derived from the Latin word "audire," which means to hear. In general, an audit is an investigation of an existing system, report or entity. There are a number of audit types that can be conducted. Auditing is the onsite verifi cation process, such as inspection or examination, to ensure compliance to requirements. An audit can apply to an entire organization or be specifi c to a function, process or production step. The three basic types of audits are product, process and system. Product audit is an examination (inspection) of a fi nished product or service (hardware, processed material or software) to evaluate whether it conforms to requirements (that is, specifi cations, performance standards and customer requirements). Process audit is a verifi cation that processes are functioning within established limits. It evaluates an operation or method against predetermined instructions or standards, to measure compliance or conformance to these standards, as well as the effectiveness (or validity) of the instructions. It revolves around verifi cation of the manner in which: 1 people, 2 material and 3 machines, etc., mesh together to produce a product. Process audits are appraisal and analytical in nature. A system audit is an audit conducted on a management system. It can be described as a documented activity performed to verify by examination and evaluation of objective evidence, that applicable elements of the system are appropriate, current and effective. A GMP (good manufacturing practice) quality audit is an example of this. Some audits are named and classifi ed according to their purpose or scope: Financial audits typically involve a focus on fi nancial controls as they relate to reporting. These audits focus on accounting controls present in the general ledger. This is an analysis of the fairness of the information contained within an entity's fi nancial statements. It is conducted by a certifi ed public accounting (CPA) fi rm, which is independent of the entity under review. Operational audits focus on the review and assessment of a business process. The activities of the business process may result in a direct or indirect fi nancial impact to the organization. An internal audit primarily focuses on operational audits, but it can extend the scope to include accounting procedures that can impact fi nancial reporting. This is a detailed analysis of the goals, planning processes, procedures and results of the operations of a business, likely with recommendations for improvement. The audit may be conducted internally or by an external entity. Compliance audits review the level of compliance with internal policies or external regulatory requirements. This is an examination of the policies and procedures of an entity or department to determine if it complies with internal or regulatory standards. This audit is most commonly used in regulated industries or educational institutions. This kind of audit is usually conducted by an external entity. Integrated audits are broader, looking at controls that address fi nancial, operational, compliance and information systems risks. These audits are typically centered on a business cycle or a specifi c part of a cycle or process. Integrated audits happen when there are two different areas of an audit required. For example, there is a fi nancial audit along with a social audit, or some areas need to be confi rmed with a fi nancial audit. Environmental audits and social audits are mostly engaged by large corporations, nonprofi t organizations or in the public sector. An environmental audit is an evaluation intended to identify Contract Manufacturing: Audits Audits as a Tool of Risk Assessment by Robin C. Koon "If you tell the truth, you don't have to remember anything." —Mark Twain Always request to have an exit interview when the onsite audit is complete. Sometimes, any misunderstandings or missing information can be cleared up before the audit is formalized.

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