Importance of Human resources Audit Essay

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The concept of HR audit has emerged from the practice of yearly finance and accounting audit, which is mandatory for every company, to be done by external statutory auditors. This audit serves as an examination on a sample basis of practices and systems for identifying problems and ensuring that sound accounting principles are followed. Similarly, an HR audit serves as a means through which an organization can measure the health of its human resource function.

An audit is a systematic process, which examines the important aspects of the function and its management, and is a means to identify strengths, weaknesses and areas where rectification may be warranted. An HR audit can be used by an organization for multiple purposes. Although the areas examined may be similar, the process used and the depth of inquiry will vary from the intended outcome. The HR audit process is conducted in different phases.Each phase is designed to build upon the preceding phase so that the organization will have a very strong overview of the health of the HR function, at the conclusion of the audit, The process also involves the acquiring and review of relevant HR manuals, handbooks, forms, reports and other information. A pre-audit information request is forwarded to the client who compiles the necessary information for review by auditors.

The information gathered is used to develop an HR audit report. The audit report categorizes action needs into three separate areas.The areas that are urgent and important (UI), not urgent needs but important (NUI), not urgent but not important needs (NNI)), and important opportunities needs (IO). As a result of this scheme of classification, managements can prioritize their steps. The comprehensive HR audit covers all areas of HR management like recruitment practices, training and development, compensation and benefits, employee and union relations, health, safety and security, miscellaneous HR policies and practices-welfare, strategic HR issues, manpower planning/budgeting.Besides classifying needs in each of the above areas, the HR audit also cites relevant laws, cases and research to support the recommendations.

People may think of audits as being mainly financial in nature, probing companies’ financial statements and accounting records to search for discrepancies, but any department in a business can be audited in some way. The human resources department is no exception to the rule, although human resources (HR) audits involve a good deal of qualitative analysis in addition to financial considerations.An introduction to human resource audits can familiarize with the types of information analyzed in an HR audit. Human resources audits are rarely conducted by agencies, unless a company is involved in serious legal trouble over an HR issue. Small businesses can conduct their own HR audits, however, to ensure that the HR function runs efficiently and effectively, as well as ensuring that the company stays within legal guidelines to avoid the possibility of an external audit.

Hiring and firing are two main contributions of the HR department to businesses.Human resources audits should always be concerned with the effectiveness, fairness and reliability of hiring and firing policies. Through Auditing one can check the reliability of interview processes, for example, by taking a look at the number of seemingly outstanding new hires who leave their jobs within one year. Audits can look into the fairness of job applicant screening policies, as another example, by comparing the ethnic make-up of all job applicants for a period of time against the ethnic make-up of new hires during the same period.HR best practices suggest regular audits to assist with continual improvement of the services you provide to employees.

Small businesses benefit tremendously from HR audits they ensure the company is on the right track as it grows and adds employees to its staff. Benefits administration, payroll processing and conflict resolution are among the many internal customer services that HR should regularly monitor. The quality of services rendered to the organization’s internal customers its employees affects job satisfaction, morale and engagement, all of which are intangible factors that ultimately affect the company’s profitability.An audit is important for ensuring that the HR department meets the needs of employees and maintains service level standards that affect the bottom line. An HR audit generally includes reviewing personnel files.

Employees’ personnel files can reveal whether the supervisors and managers are providing continuous feedback to employees and properly documenting their feedback in their employees’ files. This gives an opportunity to see the quality of feedback your supervisors give to their staff.Using the results from an HR audit of personnel files helps you rate an aspect of your company leaders’ performance and see where supervisors and managers need leadership training or performance improvement steps. Identifies the contribution of Human Resource department to the organization Various implifications concerned with HR Auditing: Quality HR auditing is the examination of an organization’s quality of services. The independent auditor examines how well a company ensures the quality of services provided to the employees and makes a report the public should be able to rely on.These are the hindrances which will result in poor auditing practices in an organization.

Auditors who examine the managing process can be compromised if they have strong economic ties to the company they audit, According to James E. Walters and Ramesh Dangol of Ball State University. The need to retain business from the audited company sometimes affects the auditor’s judgment when evaluating the system of management and how it is managed resulting the human resources are not entitled to equity.If the auditor works for a firm that offers non-auditing services to a company, and that company’s management practices are audited, the quality of that audit can be compromised. In fact, some companies have been suspected of contracting non-audit services with firms in order to get a more favorable quality audit about their organization an at-will place for an employee to be with that firm’s auditors.

Lack of Standards is also a factor that affects auditing standard is a lack of standards in the auditing firm.Though auditors as a profession are expected to follow standards, individual firms sometimes do not enforce those standards. If an auditor does not have to report on how well auditing standards were followed, quality audits can suffer from lack of integrity. Poor human resource management can go unexamined.

Lack of Education in Ethics Failure to educate all parties involved in an audit concerning ethical standards can lead to questionable audit results. The company being audited for its human resource management systems need to know the standards for auditing, as does the auditor’s management.Those parties must be made aware of ethical auditing practices. Some companies have denied access to premises to hide unsafe practices. If an auditor accepts this limited access, the audit is not considered complete.

A company that tries to thwart an audit by hiding safety issues is acting unethically, and can be subject to court order to open its doors. One ethical issue some auditor’s encounter is intimidation. Companies sometimes emphasize their political power and ability to bargain with officials when an auditor examines their management of manpower.The auditor is expected to go easy on the company because of this power. Auditors can resist this intimidation if they have the support of their managers.

Outcome of the research To identify the gaps, lapses, irregularities, short-comings, in the implementation of the Policies, procedures, practices, directives, of the Human Resource Department and to suggest remedial actions, and to know the factors which are detrimental to the non-implementation or wrong implementation of the planned Programmes and activities.Thus suggesting measures and corrective steps to rectify the mistakes, shortcomings if any, for future guidance, and advice for effective performance of the work of the Human Resource Department through evaluating the Personnel staff and employees with reference to the Performance Appraisal Reports and suggest suitable recommendations for improving the efficiency of the employees.And also to evaluate the job chart of the Human Resource Managers, Executives, Administrative Officers, Executive Officers, Recruitment Officers, whether they have implemented the directives and guidelines for effective Management of the Human resources in their respective Departments.

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