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Internal Audit Strategies for Gold Refining and Trading Companies

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Internal Audit Strategies for Gold Refining and Trading Companies

Essential Internal Audit Strategies for Gold Refining and Trading Companies

Internal Audit Strategies for Gold Refining and Trading Companies are extremely important to managing the sector’s unique risks, including money laundering, traceability, ESG compliance, and regulatory exposure. Internal audit plays a critical role in the governance framework of these companies. Given the high value, cross-border movement, and susceptibility to fraud, a risk-based approach goes far beyond standard financial review.

The nature of gold as a high-value, easily transported asset makes it especially vulnerable to misuse. Without a robust audit strategy in place, even minor weaknesses in procurement, documentation, or transport procedures can lead to large-scale financial and reputational damage. This is why audit methodologies in this sector must be tailored, data-driven, and built on the latest regulatory expectations and technological advancements.

1. Why Internal Audit Matters in Gold Operations

The gold value chain—covering sourcing, refining, transportation, storage, and trading—is highly exposed to money laundering, tax evasion, under-invoicing, and sourcing risks. Implementing internal audit strategies for gold refining and trading companies strengthens compliance and resilience through:

  • Preventing regulatory breaches (e.g., OECD, FATF, UAE standards)
  • Mitigating operational losses from misstatements and theft
  • Boosting confidence from banks, investors, and regulators
  • Reinforcing internal controls at high-risk operational points

Internal audits also enhance transparency and support responsible sourcing initiatives. In a market where environmental and human rights considerations are scrutinised, strong internal audit frameworks can act as both a defensive measure and a trust-building tool. They also reduce reputational risk during third-party assessments or media scrutiny.

This post complements our in-depth guide on Gold Inventory Auditing, which focuses on inventory reconciliation and vault verification techniques.

2. Developing a Gold-Sector Audit Universe

Define an audit universe that includes these risk-prone operational areas. These areas should be reviewed not only based on materiality but also according to qualitative factors like geopolitical risk, supplier profile, and previous audit findings.

Auditable AreaKey Risks
Procurement of Dore/Raw GoldConflict sourcing, falsified origin, KYC gaps
Refining ProcessesLosses, inaccurate yields, metal accounting errors
Export TransactionsUnder-invoicing, customs fraud, tax evasion
Third-Party RelationshipsWeak due diligence, AML exposure
Inventory HandlingTheft, misstatement, lack of segregation of duties
Sales and Payment TermsRevenue recognition, credit risk, counterparty checks

Regularly updating this audit universe ensures coverage of emerging risks and enables dynamic audit scheduling based on changes in operations, regulations, or geopolitical developments.

3. Aligning with OECD and DMCC Risk Frameworks

Internal audit strategies must integrate internationally recognised frameworks like the OECD 5-step Due Diligence Guidance and DMCC Practical Guidance. These frameworks guide:

  • Supplier and geography-based risk assessments
  • Transactional traceability across the value chain
  • Continuous KYC/EDD reviews
  • Audit trails for all lots and shipments

4. Risk-Based Audit Planning Techniques

Consider the following in your audit planning:

  1. Geopolitical and upstream risks
  2. Audit maturity ratings by business unit
  3. Materiality and variance thresholds
  4. Use of data analytics to identify anomalies

5. Fieldwork and Governance Responsibilities

  • Yield tracking and metallurgical reconciliation
  • Verification of export compliance documents
  • On-site inspections and process walkthroughs
  • Review of procurement, AML and KYC records

Internal audit should remain structurally independent, reporting to the board’s audit committee, not to the COO or CFO.

6. Third-Party Reviews and Industry Change

Periodic external audits provide fresh insights and verification of compliance systems. These reviews are often mandated under international guidelines, such as the OECD Step 4 and LBMA Good Delivery List criteria. Auditors should benchmark the company’s sourcing, refining, and export documentation processes against evolving industry norms.

Notably, the LBMA has recently fast-tracked refiner transparency, with reforms aimed at enhancing oversight of sourcing data and trading disclosures. These changes form part of a broader sustainability and traceability push outlined in LBMA’s 2024–2026 Responsible Sourcing Strategy.

It’s worth noting that these fast-tracked updates coincided closely with the departure of Sakhila Mirza, the LBMA’s General Counsel and Executive Board Member, who has since taken up the role of President at Responsible Gold—a New York-based traceability platform. Was this transparency agenda accelerated ahead of her transition? That’s a fair question.

Conclusion: From Compliance to Strategic Value

Internal audit strategies for gold refining and trading companies must evolve beyond box-ticking exercises. Auditors are no longer back-office monitors—they are strategic partners in managing regulatory risk, fraud, and performance alignment.

With mounting pressure for transparency and ESG accountability, gold industry players who invest in robust audit capabilities position themselves for long-term success, regulatory alignment, and trust with key stakeholders.

Contact us if you need support implementing a custom audit framework for your refining or trading operation.

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