11/2/2016

SocialAudit|Definition|Objectives|Need|DisclosureofInformation

SocialAudit|Definition|Objectives|Need|
DisclosureofInformation
Auditing

The social audit movement was first started in U.S.A. Later it gathered momentum in
U.K., Japan and one or two Western countries. In spite of this development the subject
hasnotyetattainedthestatusofascienceinmanycountries.InIndia,socialauditfindsa
placeincompanylegislation.

Image:SocialAuditdefinition,objectives,need,informationdisclosure

Meaning and Definition of Social Audit

Differentpeoplehaveinterpretedtheexpressionsocialauditdifferently.Tosomeauthors,
it means the public disclosure of a companys social performance to others it means
internalevaluationofacompanyssocialresponsibilityperformance.Someauthorsthink
that social audit is a comprehensive evaluation of the way a company discharges all its
responsibilities to its shareholders, customers, employees, and to the wider community.
Thus,thereisatotaldisagreementamongthescholarsastotheexactmeaning,andthe
componentsofthisnovelconcept.However,weshallgiveabriefaccountoftheopinionof
expertsasbelow.
DefinitionofMelvinAushen:
Thesocialauditisanideawhosetimehascome,butwhichisnotreadytobe
takenoffthedrawingboardandputtowork.
Thisdefinitionisveryvagueanddoesnotdescribewhatsocialauditreallymeans.
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SocialAudit|Definition|Objectives|Need|DisclosureofInformation

DefinitionofBoweni
Acommitmenttosystematicassessmentofandreportingonsomemeaningful,
definabledomainofacompanysactivitiesthathaveasocialimpact.
Thisdefinitionisworthmentioning.Thisdefinitionhighlightsthevariousaspectsofsocial
audit.

Social accounting and Social Audit

Socialaccountingisasystematicassessmentandreportingonthosepartsofacompanys
activities, which have a social impact. It refers to the identification, measurement,
recordingandreportingtheinformationastosocialactivitiesoftheconcerntoitsusers
(both internal and external). On the other hand, social audit refers to the systematic
evaluationofanorganizationssocialperformance.Here,itseconomicperformanceisnot
considered.Itdisclosesthecompanysinvolvementinsociallyorientedactivities,activities
taken for the wellbeing of the employers of the concern, activities as to prevention of
environmentfrompollutionetc.

Objectives of Social Audit

Goyder defined the objectives of social audit in clear terms. He classified the objectives
intotwobroadcategoriesnamely,
1.Principalobjectives,and
2.Secondaryobjectives.

Principal Objectives of Social Audit

TheprincipalobjectivesaccordingtoGoyderareasfollows.
1.Theextension,developmentandimprovementofthecompanysbusinessandbuilding
upofitsfinancialindependence.
2.Thepaymentofafairandregulardividendtotheshareholders.
3.Thepaymentoffairwagesunderthebestpossibleconditionstotheworker.
4.Thereductionofpricestotheconsumers.

Secondary Objectives of Social Audit

1.Provisionofabonustotheworkers.
2.Assistinpromotingtheamenitiesofthelocality.

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3.Assistindevelopingtheindustryinwhichthefirmisamember.
4.Promoteeducation,researchanddevelopmentinthetechniquesoftheindustry.
Fromtheseobjectives,wecaninferthatsocialauditisreallyanextensionoftheprinciple
ofpublicdisclosuretowhichcorporationsaresubject.

Need for Social Audit

Each business enterprise is not only connected with internal public but intimately
connected with external public also. The modem corporations are more powerful and
commandhugeresources.Thispowershouldnotbeusedindifferently,irresponsiblyorin
anantisocialway.Itsactivitiescancreatemuchimpactonthesociety.Assuchitsimpact
oversocietycannotbeignoredortakenlightly.Itsbehaviornotonlyaffectsthesocietybut
alsocreatesproblemstotheGovernment.Thus,socialaudithasbecometheneedofthe
day.
Thisisamatternotofambition,Prof.Galbraithsaysbutofnecessity.

Disclosure of Information during Social audit

Itisnowwellsettledthatsocialauditmustbetakeninallorganizations.Butitshouldbe
rememberedthatmereundertakingofsocialauditisnotsufficientbutwhatisneededisa
frankandfulldisclosureofitsworking.Prof.Robert.
ADahlinthisconnectionrightlyremarkedthat
Amajorcorporationcaninfluencecontrolandevencoercepeople(individuals
orgroups)andsometimeseventhenation.Hence,theneedforwidedisclosure
becomesinevitable.

Information to be Disclosed during social audit

Both financial and nonfinancial information should be disclosed. The financial
information can be disclosed through profit and loss account, balance sheet etc. Such
informationismainlydisclosedinquantitativeform.Thefinancialinformationrevealsthe
true position of a company regarding its liquidity and bankruptcy. Nonfinancial
informationcanbeexpressedbothinqualitativeandquantitativedata.Quantitativedata
isgenerallypreferredbecausetheyarepreciseandconvincing.

Category of Information to be disclosed

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National Association of Accountants Committee on Accounting for Corporate Social

performanceinCanadadividedallsuchinformationintofourbroadcategories.Theyare
1. Community Involvement: Under this category, socially oriented activities that are
primarilyofbenefittothegeneralpublicmustbespecified.
2.HumanResources: Social performance directed to the wellbeing of the employees
comesunderthiscategory.
3. Physical Resources and Environmental Contribution: This category refers to
the activities directed towards alleviating (making easier to bear) or preventing
environmental deterioration (Pollution). It, also Includes the adherence to the law and
going beyond it in areas such as air quality, water quality etc. Conservation of scarce
resourcesandthedisposalofsolidwastealsocomeunderthiscategory.
4. Production or Service Contribution: It is mainly concerned with the impact of
companys product or service on society. This includes product quality, packaging,
advertising,warrantyprovisionsandproductsafety.

Persons Benefited by the Disclosure of information

D.R. Singh in his book Performance of Public Enterprises in India says that the
following categories of persons are benefited by a frank disclosure of socially valuable
information.
1.FinancialInstitutions.
2.Shareholders.
3.AcademicInstitutionsandConsultants.
4.Government.
5.TradeUnionsandPoliticalleaders.
6.Environmentalists

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