Compliance Audit
A compliance audit is a systematic review of an alcohol business's operations, records, labels, and practices to verify adherence to federal TTB regulations and state alcohol laws, conducted either by regulatory agencies or by third-party compliance consultants.
In Plain English
A compliance audit is a thorough check of an alcohol business's operations to make sure everything is being done by the book. The TTB and state agencies conduct regulatory audits, but many businesses also hire compliance consultants to do proactive audits before the regulators come knocking. Audits cover everything: Are your labels accurate? Are your production records complete? Are your excise taxes correctly calculated and paid? Are your premises meeting bond and security requirements? Are your trade practices within legal bounds? For new businesses especially, a pre-regulatory compliance audit can identify and fix problems before they become violations. This is one of the highest-value services that compliance consultants offer.
Technical Detail
TTB audits are conducted by the Tax Audit Division and may cover: excise tax computation and payment accuracy, production and inventory records (gauging, processing, storage, bottling), bond adequacy, label compliance (comparing actual labels to approved COLAs), import documentation, and trade practice activities. The TTB uses a risk-based approach to select audit targets, considering factors like production volume, tax liability, compliance history, and industry tips. State ABC audits focus on license compliance, operating hours, sales to minors prevention, pricing compliance, and state-specific requirements. Third-party compliance audits typically cover all areas that a regulatory audit would examine plus strategic recommendations. Common findings include: discrepancies between approved COLAs and actual labels, incomplete production records, incorrect tax calculations, and insufficient age verification procedures at retail.
Why It Matters
Compliance audits represent a major service opportunity for consultants serving the beverage alcohol industry. New companies identified through BevAlc Intelligence are prime candidates for compliance audit services because they are establishing operations and may not yet have robust compliance systems in place. For BevAlc Intelligence users who are compliance consultants, the timing of a new company's first COLA filing is an ideal moment for outreach about compliance audit services.
Related Terms
Frequently Asked Questions
How often does the TTB audit alcohol businesses?
The TTB uses a risk-based approach and does not audit every business on a fixed schedule. Large producers with significant tax liability may be audited more frequently. Small producers may go years without a federal audit, but they should not assume they will not be selected. Being audit-ready is important regardless of likelihood.
What happens if a compliance issue is found during an audit?
Outcomes range from corrective action requests (fix the issue within a deadline) to offers in compromise (monetary settlements) to permit suspension in severe cases. The severity of the response depends on the nature and extent of the violation, the company's compliance history, and whether the issue was intentional or inadvertent.
Should a new alcohol business get a compliance audit?
Yes, strongly recommended. A proactive compliance review before or shortly after launching operations can identify issues before they become violations. Many compliance consultants offer startup compliance packages specifically designed for new alcohol businesses.