HRD audit

MBA-3rd sem
Flow of Presentation
 What is Audit
 Human resource Audit
 Objectives of HR Audit
 Need for HR Audit
 Benefits of HR Audit
 Principles of effective HR Auditing
 Approaches to HR Audit
 Areas of HR Audit
What is Audit?
Review and verification of completed transactions to see
whether they represent a true state of affairs of the
business or not.
Examination and evaluation of accounts and records.
Human Resource Audit
HR Audit is an important management control device. It is
a tool to judge organisations performance and
effectiveness of HR management.
According to Dale Yoder, “HR audit refers to an
examination and evaluation of policies, procedures and
practices to determine the effectiveness of personnel
(1) To review every aspect of management of HR to determine
the effectiveness of each programmes in an organisation.
(2) To seek explanation and information in respect of failure
and success of HR.
(3) To evaluate implementation of policies.
(4) To evaluate the performance of personnel staff and
(5) To seek priorities, values and goals of management
Need for Human Resource
 The managements of organisations have realized the need for
HR audit because of powerful influence on motivation of
employees at work due to participation of employees in
decision making.
Growth of organisation needs HR audit.
An effective two way communication system has also
facilitated the need for HR audit.
The HR audit becomes essential because of delegation of
authority and decentralization of power.
Many plants are located at large distances. This also made the
HR audit compulsory.
Benefits of HR Audit
 Identification of the contributions of the HR department to the
Improvement of the professional image of the HR department.
Finding critical personnel problems.
Ensuring timely compliance with legal requirements.
Creation of increased acceptance of the necessary changes in
the HR department.
Encouragement of greater responsibility and professionalism
among members of the HR department.
Principles of effective HR Auditing
1) Need for independence
2) Audit activities should be budgeted for properly
3) Training of auditors is must
4) Set standards for the HR audits
5) Agree on reporting template
6) Auditors should sign a confidentiality agreement
7) Establish timeframes for every phase/step of the audit
8) Each type of an HR audit has its own purpose and
Approaches to HR Audit:
1) Comparative approach
2) Outside authority approach
3) Statistical approach
4) Compliance approach
5) Management by objectives(MBO)approach
(1) Comparative Approach:
Under this approach auditors identify one model company
and the results obtained of the organisation under audit are
compared with it.
(2) Outside Authority Approach:
In outside authority approach a benchmark is set to
compare own results. A standard for audit set by outside
consultant is used as benchmark.
(3) Statistical Approach:
Under statistical approach the statistical information
maintained by the company in respect of absenteeism,
employee turnover etc. is used as the measures for
evaluating performance.
(4) Compliance Approach:
Under compliance approach the auditors make a review of
past actions to determine to see whether those activities
are in compliance with the legal provisions and in
accordance with the policies and procedures of the
(5) MBO Approach:
Under MBO approach specific targets are fixed. The
performance is measured against these targets. The
auditors conduct the survey of actual performance and
compare with the goals set.
Areas of HR Audit
HR Function
Managerial compliance
HR climate
Corporate strategy
Audit of human resource function
Determination of objectives of each activity
Identification of responsibility of performance
Review of performance
Follow- up of action plan
Developing an action plan to correct deviations between
results and goals
2. Audit of managerial compliance
This covers audit of managerial compliance
of personnel policies, procedures, and legal and welfare
provisions. Compliance with the legal provisions is most
important as any violation makes the management guilty
of an offence.
Audit of human resource climate
The working culture in any industry has an
impact on employee motivation, morale, job satisfaction,
Employee absenteeism, safety records and employee
4. Audit of corporate strategy
This helps the industry to gain a competitive
advantage. By analyzing the SWOT analysis of the
industry, the management can take decisions regarding
marketing channels, services, innovations, low cost
production and other like decisions.
Thank You
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