human resource audit &
TRANSCRIPT
-
8/7/2019 Human Resource Audit &
1/27
HUMAN RESOURCE AUDIT &
ACCOUNTING
BY:-
JATIN NAGPAL(66)
TARUN LAL
RAVI KUMAR(100)MEGHA PANWAR(104)
-
8/7/2019 Human Resource Audit &
2/27
HUMAN RESOURCE AUDIT
It is a systematic evaluation of personnel policies,
procedures and practices to determine effectiveness
of personnel management. Basically it covers three
things:
Measurement and evaluation of personnel
programmes, policies & practices.
Identification of gap between objectives and results Determination of what should or should not be done
in future.
-
8/7/2019 Human Resource Audit &
3/27
Why Human Resource/Personnel Audit?
Increasing size of the organisation and personnel in
most organisations
Changing philosophy of management towards human
resources
Increasing strength and influence of trade unions
Changing HR philosophy
Increasing dependence of the organisation on thehuman resources system and its effective functioning.
-
8/7/2019 Human Resource Audit &
4/27
Purpose For Keeping Records
To keep an orderly account of progress.
To facilitate the preparation of the statement of the
true conditions.
To enable the making of comparisons.
To facilitate the detection of errors and frauds.
Legal requirements
Miscellaneous purposes
-
8/7/2019 Human Resource Audit &
5/27
Fundamental Principles For Record
Keeping
Justification
Verification
Classification
Availability of required information
-
8/7/2019 Human Resource Audit &
6/27
Significance of HR Audit
Supply the information required by themanagement & trade unions to reviewpersonnel policies
Supply the information required by variousagencies.
Provide the information about manpower
inventory for manpower planning. Identify training & development needs.
Revise pay scale & benefits from time to time.
-
8/7/2019 Human Resource Audit &
7/27
Types of Personnel Records
Job application & test scores.
Job description & job specifications.
Interview results. Medical reports.
Payroll
Training records
-
8/7/2019 Human Resource Audit &
8/27
Objectives of H R Audit
Review organisational system & human
resource sub system.
To find out the effectiveness of variouspersonnel policies.
To review the personnel system in comparison
-
8/7/2019 Human Resource Audit &
9/27
Benefits of a HR AuditBenefits of a HR Audit
Helps align HR goalsHelps align HR goals
Reduces human resource costsReduces human resource costs
Finds better ways for HR to contributeFinds better ways for HR to contribute
Provides specific, verifiable dataProvides specific, verifiable data
Ensures timely complainEnsures timely complain
Stimulates uniformityStimulates uniformity
Discloses how well managers are doingDiscloses how well managers are doing Reviews and improves information systemReviews and improves information system
-
8/7/2019 Human Resource Audit &
10/27
Steps in Conducting HR AuditsSteps in Conducting HR AuditsSteps in Conducting HR AuditsSteps in Conducting HR Audits
Defining theDefining the
scope of thescope of the
auditaudit
Choosing theChoosing the
researchresearch
approachapproach
Selecting researchSelecting research
design and datadesign and data
collection methodcollection method
Analyzing data,Analyzing data,
evaluating, andevaluating, and
preparing reportpreparing report
-
8/7/2019 Human Resource Audit &
11/27
The Scope of HR AuditsThe Scope of HR AuditsAlignment withAlignment with
Corporate StrategyCorporate Strategy
HR strategy must be consistent with
corporate strategy and continually
examined
Managerial ComplianceManagerial Compliance
Managers must comply with HR
policies, procedures and legalrequirements
SS
aa
tt
ii
ss
ffaa
cc
tt
ii
oo
nn
Employee SatisfactionEmployee Satisfaction
Human resource departments should
attempt to meet employee objectives
where feasible
-
8/7/2019 Human Resource Audit &
12/27
Research Approaches to AuditsResearch Approaches to Audits
ComparativeComparative Simplest form of research
Uses another division or company as a model or
may use benchmarks as indices
ComplianceCompliance Reviews past practices
Reviews documentation to ensure managers are
complying with policies and laws
ManagementManagement--byby--objectivesobjectives
Creates specific objectives to assess performance
dimensions
Balanced scorecard looks at multiple perspectives
-
8/7/2019 Human Resource Audit &
13/27
Research Design & Data CollectionResearch Design & Data Collection
Interviews
Surveys
Records analysis Human resource experiments
-
8/7/2019 Human Resource Audit &
14/27
InterviewsInterviews
Interviews with employees and managers
Exit interviews
Interviews with departing employees togauge their impressions of a firms strengths
and weaknesses, especially relating to HR
systems and policies
-
8/7/2019 Human Resource Audit &
15/27
SurveysSurveys
Surveys
May be used to supplement interviews
Attitude surveys Systematic assessment of employees
opinions about various work-related factors.
-
8/7/2019 Human Resource Audit &
16/27
Attitude SurveysAttitude Surveys
Areas ofAreas ofConcernConcern
EmployeeEmployee
attitudes aboutattitudes about
supervisorssupervisors
PerceivedPerceived
effectiveness ofeffectiveness of
HR departmentHR department
EmployeeEmployee
attitudesattitudes aboutabout
their jobstheir jobs
-
8/7/2019 Human Resource Audit &
17/27
Records Commonly ReviewedRecords Commonly Reviewed
Safety and Health RecordsSafety and Health Records
Productivity RecordsProductivity Records
Grievance RecordsGrievance Records Compensation RecordsCompensation Records
Job Placement/ Selection RecordsJob Placement/ Selection Records
Human Rights Compliance RecordsHuman Rights Compliance Records
HR Implementation RecordsHR Implementation Records
Employee Files and RecordsEmployee Files and Records
-
8/7/2019 Human Resource Audit &
18/27
Human Resource Accounting
According to American Association of Accountants
(AAA), HRA is a process of identifying and
measuring data about human resources and
communicating this information to the interestedparties
Eric Flamholtz
Accounting for people as organizational resources. It
is the measurement of the cost and value of people for
the organization
-
8/7/2019 Human Resource Audit &
19/27
Objectives and Purposes of Human Resource
Accounting
Objectives
Recognition of value ofall resources controlled/ used by the
entity (Primary Objective)
Improvement of Human Resource Management (Quality andQuantity of Goods can be Increased)
Effective and Efficient management of people
Purposes
Internal Decision Making
External Decision Making
-
8/7/2019 Human Resource Audit &
20/27
Internal Decision Making - on alternative investment
decisions
E.g. Direct Recruitment Vs Internal Promotion
Retirement Vs Retention
External Decision Making - To evaluate the true worth
of the firm for investor decision making
-
8/7/2019 Human Resource Audit &
21/27
ADVANTAGES
It throws light on the strength & weaknesses of the existing
workforce in an organization.
It provides valuable feedback to managers regarding the
effectiveness of HR policies & practices. It helps potential investors judge a company better on the
strength of the human assets utilized therein.
It helps management in taking appropriate decisions regarding
the use of human assets in an organization.
-
8/7/2019 Human Resource Audit &
22/27
LIMITATIONS
It is not easy to value the human assets in an organisation.
HRA is full of measurement problems.
Employees & unions may not like the idea, because HRA may
lead to division among the ranks of employees. There is no empirical evidence to support the idea that HRA is
an effective tool to measure the economic value of people to
the organisation.
-
8/7/2019 Human Resource Audit &
23/27
Valuation Approaches of Human Resource
Measurement is arbitrary and there are mainly 2
approaches;
-Cost based approaches
- Earnings based approaches
Cost Based Approaches
1. Historical Cost Approach
2. Replacement Cost Approach3. Opportunity Cost Approach
-
8/7/2019 Human Resource Audit &
24/27
Historical Cost Approach
The cost of recruitment, selection, development are all
capitalized and amortized over the useful life time of the
employee. This amortization may be dealt according to the
situation.
Benefits: Easy to operate, Conforms with the matching
principle, Similar to the treatment of other fixed assets.
Shortcomings: Estimation of the useful life time may not be
easy, The value of humans are generally increasing over time -
but this method gives a declining picture, This method doesnt
actually measure the value but undermines it.
-
8/7/2019 Human Resource Audit &
25/27
Replacement Cost Approach
The cost to replace the existing human resources are estimated.
All costs incurred to attain the current level of competence of
an existing employee. Created from scratch
Benefits: Is present/ future oriented
Disadvantage: Not always possible to obtain such a measure
(identical replacement), It is hence subjective
-
8/7/2019 Human Resource Audit &
26/27
Opportunity Cost Approach
Is based on economic concept which overcomes the deficiency
in replacement cost app. Measured through a competitive
bidding process within the entity.
Steps:1. The entity is divided into investment centers
2. The investment centre managers bid for scarce
employees they need within the entity
3. The maximum bid price may obtained by the
capitalization of the excess profits generated by the
employee
-
8/7/2019 Human Resource Audit &
27/27
Earnings Based Approaches
Expected realisable value method: The elements of expected
realisable value such as productivity, transferability &
promotionability can be measured through personnel research,
appraisal technique & other objective methods.
Discounted net present value of future earnings: Rensis Likert
proposed three sets of variables- casual, intermediate &
output- which help in measuring effectiveness over a period of
time.