TPA Romania: Internal Audit – From Compliance to ESG Strategy. How Companies Can Turn an Obligation into a Competitive Advantage
In today’s business environment, many Romanian companies face a dual challenge: on one hand, there is the obligation to implement and strengthen their internal audit function and, on the other, increasing pressure from investors, clients and partners—both local and international—to demonstrate concrete performance in environmental, social and governance (ESG) areas. While some organisations still view internal audits solely through a compliance lens, in reality it represents a strategic tool for governance, transparency and sustainable development. Expanding its scope to ESG significantly amplifies the value it brings to an organisation, according to TPA Romania, a leading company in Central and Eastern Europe specialising in audit, accounting, tax advisory and legal consulting services.
According to Law No. 162/2017, all companies required to undergo statutory audit must also implement an internal audit function, and failure to do so may result in penalties of up to 100,000 lei. With the Authority for Public Oversight of Statutory Audit Activity (ASPAAS) this year launching a campaign to verify the compliance of entities subject to statutory audit—requesting proof of the implementation of an internal audit function, its organisational structure and a copy of the latest internal audit report—it is becoming increasingly clear that this obligation is not to be treated superficially. At the same time, requirements imposed by the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) compel organisations to prepare for sustainability reporting, which demands a high level of internal control, traceability and data accuracy.
“There is the real opportunity here to kill two birds with one stone: through a single investment—the implementation of an internal audit function—an organisation can both fulfil its legal obligations and demonstrate that it takes environmental, social and governance aspects seriously. So, an internal audit function is no longer just an administrative requirement, it also acts as a bridge between compliance and strategy, strengthening trust among investors, clients and partners. In many companies, an internal audit is still perceived as a compliance requirement. However, an ESG-focused internal audit function changes this perspective, transforming an obligation into a strategic tool for growth and differentiation,” explains Claudia Bratu, Audit & Advisory Partner and Head of ESG Services at TPA Romania.
An ESG-Focused Internal Audit Becomes a Market Differentiator
A traditional internal audit focuses on financial and operational processes, while an ESG-focused internal audit expands the scope of analysis, assessing how an organisation manages environmental risks, as well as aspects such as diversity, ethics, health and safety, and the quality of reported data. This type of audit provides a comprehensive view of how sustainability is integrated into business processes and contributes to better governance.
“Although there is no explicit legal obligation to conduct a dedicated ESG internal audit, companies reporting under the CSRD or seeking to attract investors and green financing are finding that integrating ESG components into their internal audits represents a significant competitive advantage,” adds Claudia Bratu.
ESG audit provides a complete X-ray of an organisation, generating a realistic picture of how sustainability considerations are managed and helping the company understand how well it aligns with market requirements and stakeholder expectations. According to TPA Romania, first and foremost the audit helps organisations define double materiality, meaning those environmental, social and governance areas that are truly significant both for the company’s impact on the environment and community, and for the influence these factors have on its financial performance. Identifying these relevant areas allows efforts to be focused where they matter most.
“What’s more, perhaps the most important outcome of a well-structured ESG internal audit is that it drives an organisation to review and formalise its strategy, coherently integrating sustainability objectives into their business plan. The result: clearer priorities, better-aligned decisions and a solid strategic direction recognised by investors and partners. In a market where transparency and responsibility are becoming selection criteria, a well-implemented ESG-focused internal audit can provide a real competitive advantage,” says Claudia Bratu.
Costs and Benefits of an ESG-Focused Internal Audit
According to TPA Romania, an ESG-focused internal audit may involve higher costs than a traditional audit due to the complexity of the process and the need for specialised skills. In addition to the costs associated with hiring permanent staff with expertise in environmental, social and governance areas, companies must also take into consideration additional investments in IT systems, dedicated applications for collecting, managing and reporting ESG data, employee training and the updating of internal procedures. All these aspects can generate a significant additional financial effort, especially for medium and small organisations. An increasingly common solution therefore is to outsource the internal audit function or work with consultants who already have their own multidisciplinary teams and can provide integrated services at more accessible costs. This allows companies to benefit from expertise without bearing the fixed costs of running a permanent internal department of their own.
“Although it requires investment, the benefits of a well-executed ESG-focused internal audit far outweigh the costs. In the short term, it improves data quality and accuracy, reduces non-compliance risks and prepares the company for an external audit—in particular the limited assurance standards required in line with the CSRD. In the medium and long term, ESG auditing facilitates access to green financing, attracts responsible investors, contributes to optimising operational costs and strengthens a company’s reputation. Instead of being perceived as an additional expense, ESG auditing should be seen as a strategic investment in transparency, efficiency and sustainable competitiveness,” says Claudia Bratu.
The Challenges of Preparing for an ESG-Focused Internal Audit
Currently, preparing for an ESG internal audit remains a challenge for many Romanian organisations, who face legislative uncertainties regarding the CSRD, ESRS, Omnibus, Taxonomy, EUDR and other European regulations, as well as difficulties in collecting and validating ESG data, which are often stored in non-uniform formats without adequate coherence and traceability.
“In practice, many companies continue to approach ESG more as a reporting project than an integrated business process, resulting in a lack of specific controls and procedures in key areas such as procurement, human resources and investments. An additional challenge is the shortage of internal auditors with ESG expertise, as the local market has a limited number of specialists capable of addressing sustainability areas in a multidisciplinary manner by combining financial, technical and compliance expertise,” explains the TPA Romania expert.
