UNIVERSITY OF MUMBAI

“STUDY OF AUDITING ON
HUMAN RESOURCES AND IT’S
RISK"
Master of Commerce
(M.Com)
Programmer Guidelines for
Project Work At
Second Year Semester III

Under Choice Based Credit,

Grading and Semester
System
(To be implemented from
Academic Year 2021-2022)
Faculty of Commerce
 "STUDY OF AUDITING ON HUMAN
RESOURCES AND IT’S RISK"

A Project Submitted to
University of Mumbai for partial completion of the
Degree of
Master in Commerce

Under the Faculty of Commerce

By
AKSHATA SANDEEP KADAM

Under the Guidance of

Prof AMBADAS BHORADE

D.G. Ruparel College of Arts, Science and Commerce

Matunga, Mumbai, Maharashtra,
400016
November 2021
 D.G. Ruparel College of Arts, Science and Commerce
Matunga, Mumbai, Maharashtra,
400016

CERTIFICATE
This is to certify that Ms. AKSHATA SANDEEP KADAM has worked and duly
completed her project work for the degree of Master in Commerce under the
faculty of commerce in the subject "ADVANCED AUDITING" and her project
entitled “STUDY OF AUDITING ON HUMAN RESOURCE AND ITS RISK"
under my supervision.

I further certify that the culture work has been done by the letter under my guidance and that no part of
it has been submitted previously for any Degree of any University.

It is her own work and facts reported by her personal lending and investigations,

Prof. AMBADAS BHORADE

(Guidance Teacher)

Date of Submission
 DECLARATION BY LEARNER

I the undersigned Ms. AKSHATA SANDEEP KADAM, hereby, declare That the
work embodied in this project work titled "STUDY OF AUDITING ON HUMAN
RESOURCES AND ITS RISK"

COMPANIES” forms my own contribution to the research work carried out under
the guidance of Prof. AMBADA BHORADE is a result of my own research work
and has not been previously submitted to any other University for any other Degree
to this or any other University.

Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography

I, hereby further declare that all information of this document has been
Obtained and presented in accordance with academic rules and ethical
conduct.

AKSHATA SANDEEP KADAM

Certified by

Prof. AMBADAS BHORADE (Guiding teacher).

 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous and
the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.
I would like to thank my Head of Institute TUSHAR DESAI for
providing the necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator

Dr.RAVINDAR NETAWATE, for his moral support and guidance.

I would also like to express my sincere gratitude towards my project guide.

Prof. AMBADAS BHORADE Whose guidance and care made the project
successful

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.
 INDEX
Chapter Chapter Sub Topic
No Name Point
1 Introduction
1.1 Introduction
1.2 Origin And Evolution
1.3 Meaning
1.4 Definitions
2 Research
Methodology
2.1 Research Methodology
2.2 Limitations Of HRD Audit
2.3 Objectives
2.4 Features
2.5 Nature
2.6 Need
2.7 Scope
2.8 Importance
2.9 Process
2.10 Frequency And Types
2.11 Areas
2.12 Advantages & Disadvantages
3 REVIEW OF
LITERATURE
3.1 Review Of Literature

4 DATA
ANALYSIS
4.1 Survey Question
4.2 Survey Reponses

5 CONCLUSIONS
5.1 Conclusions
5.2 Suggestion
5.3 Reference
5.4 Bibliography
6
 CHAPTER: 1
INTRODUCTION

7
HUMAN RESOURCE

1.1 INTRODUCTION

Economic decisions in every society must be based upon the

information available at the time the decision is made. For example, the
decision of a bank to make a loan to a business is based upon previous
financial relationships with that business, the financial condition of the
company as reflected by its financial statements and other factors.

If decisions are to be consistent with the intention of the decision

makers, the information used in the decision process must be reliable.
Unreliable information can cause inefficient use of resources to the
detriment of the society and to the decision makers themselves.

In the lending decision example, assume that the barfly makes the loan
on the basis of misleading financial statements and the borrower
Company is ultimately unable to repay. As a result the bank has lost
both the principal and the interest. In addition, another company that
could have used the funds effectively was deprived of the money.

8
As society become more complex, there is an increased likelihood that
unreliable information will be provided to decision makers. There are
several reasons for this: remoteness of information, voluminous data
and the existence of complex exchange transactions

As a means of overcoming the problem of unreliable information, the

decision-maker must develop a method of assuring him that the
information is sufficiently reliable for these decisions. In doing this he
must weigh the cost of obtaining more reliable information against the
expected benefits.

A common way to obtain such reliable information is to

have some type of verification (audit) performed by
independent persons. The audited information is then used
in the decision making process on the assumption that it is
reasonably complete, accurate and unbiased.

9
1.2 ORIGIN AND EVOLUTION

The term audit is derived from the Latin term ‘audire,’ which means to
hear. In early days an auditor used to listen to the accounts read over by
an accountant in order to check them Auditing is as old as accounting. It
was in use in all ancient countries such as Mesopotamia, Greece, Egypt.
Rome, U.K and India. The Vedas contain reference to accounts and
auditing. Arthasashthra by Kautilya detailed rules for accounting and
auditing of public finances.

The original objective of auditing was to detect and prevent errors and
frauds Auditing evolved and grew rapidly after the industrial revolution
in the 18th century with the growth of the joint stock companies the
ownership and management became separate. The shareholders who
were the owners needed a report from an independent expert on the
accounts of the company managed by the board of directors who were
the employees.

10
The objective of audit shifted and audit was expected to ascertain
whether the accounts were true and fair rather than detection of errors
and frauds. In India the companies Act 1913 made audit of company
accounts compulsory with the increase in the size of the companies and
the volume of transactions the main objective of audit shifted to
ascertaining whether the accounts were true and fair rather than true
and correct. Hence the emphasis was not on arithmetical accuracy but
on a fair representation of the financial efforts

The companies Act.1913 also prescribed for the first time the
qualification of auditors The International Accounting Standards
Committee and the Accounting Standard boards of the Institute of
Chartered Accountants of India have developed standard accounting and
auditing practices to guide them. Accountants and auditors in the day to
day work The later developments in auditing pertain to the use of
computers in accounting and auditing. In conclusion it can be said that
auditing has come a long way from hearing of accounts to taking the
help of computers to examine computerized accounts

11
1.3 MEANING

The term audit is normally associated with financial accounting and refers
to the official examination and verification of a company’s financial and
accounting records. HR audit is a similar concept in the field of Human
Resource Management.

HR audit involves examining and reviewing the organization’s existing

policies, procedures and practices regarding recruitment and selection,
orientation and placement, training and development, job analysis and
design, job evaluation, compensation, morale and motivation, employee
health and safety, social welfare, industrial relations, etc.

According to Eric Flamholtz, “Human Resource Audit is a systematic

assessment of the strengths, limitations, and developmental needs of its
existing human resources in the context of organizational performance.”
Normally, in an organization, not all HR policies are formal and written;
there are many informal policies, not officially documented. The HR audit
involves the review of all the HR policies, procedures and practices
currently adopted by the organization, irrespective of whether they are
formal or informal.

12
1.4 DEFINITIONS

Human Resource Audit is an examination and verification of personnel

related accounts and records; it increases the effectiveness of the design and
implementation of HR policies and programmes; and it is an important
approach to human resource planning.

It is conducted to check whether the performance of managers has been fair

in the overall interests of their organization. It is a systematic and
comprehensive analysis of all activities and results of a personnel
programme to review the effectiveness and utility of various personnel
functions, activities, policies and procedures.

It is a strategic planning tool to help an organization evaluate the

effectiveness of its human resources function. Audit reports provide key
measurements on strengths and areas of enhancement to point out
opportunities that a business organization can leverage to become better
employer and meet long range goals.

13
“HR audit evaluates the HR activities in an organization with a view to
their effectiveness and efficiency”

“HR audit is concerned with the gathering, analysing information, and then
deciding what actions need to be taken to improve performance”

“HR audit is a tool to measure an employer’s compliance with its legal

obligations in managing its workforce and chart any corrective actions that
might be needed”

“HR audit is an examination of the human resources policies, practices, and

systems of a firm (or division) to eliminate deficiencies and improve ways
to achieve goals”

14
 CHAPTER: 2
RESEARCH METHODOLOGY

15
2.1 RESEARCH METHODOLOGY

For a good HRD audit it is advisable to use a combination of methods.

The interviews can be scheduled hierarchically from the CEO to the HR

chiefs, functional heads, the line managers, employees, etc. so that the
auditors would be able to obtain a macro picture at the commencement of
the audit and can subsequently relate the feedback from other constituents.
Before conducting interviews, the auditors should be introduced to the
people with whom they will be interacting.

During the process of observation, the auditors should attempt to look into
various aspects, such as the physical layout, work environment, working
conditions, amenities, and recreation facilities. During the meetings/
discussions and transactions, the auditors should be able to select cross-
functional teams, groups/teams from whom the feedback will be authentic
and open.

The auditors have to be competent in meeting and team management areas.

The auditors can cross-check various aspects, such as the preparedness of
the employees for the audit meetings, openness/receptivity to feedback, co-
ordination of the meetings, interpersonal relations, and organization
conflicts.

16
1. Individual Interviews:

The auditors/consultants begin their evaluation by means of one-to-one

interviews with the top management and senior managers. This enables the
auditors to understand the future plans of and the opportunities available for
the company. Another reason is that these interviews help the auditors/
consultants to understand the maturity of the top and senior management
and also their style of management.

2. Group Interviews:

When undertaking an HRD audit in very large organizations, auditors may

opt to obtain feedback from various segments of employees through group
interviews. These groups may be selected on the basis of stratified sampling
or random sampling methods. In some cultures, individuals may have
inhibitions in giving feedback. In such cases, group interviews help to
obtain feedback.

3. Workshops:

In certain instances, the auditors may feel the necessity of replacing the
individual and group interviews with large scale interactive processes
(LSIP), with the number of participants ranging from 30 to 300. The
participants may gather in a room to give a feedback on the HR function
and systems.
The participants work in small groups around various sub-systems to make
presentations of the SWOT analysis and the auditors record the feedback.
The feedback could aid their audit process.
17
4. Questionnaires:

The questionnaires can address the HR processes, such as career planning,

work allocation, learning and developmental systems, and quality
orientation. For the purpose of capturing the real picture, the auditors
should do some homework before selecting various parameters in the
questionnaire and assigning weighted averages to each of the items in the
questionnaire depending on the organizational requirement.
Another caution for the auditors is to sufficiently map all the key HR
practices while designing the questionnaire. The auditors should also be
conscious and empathetic while designing each of the parameters. Typically
some of the questionnaires design the items in the questionnaire with the
OCTAPAC (openness, confrontation, trust, autonomy, pro-action,
authenticity, collaboration) parameters. The questionnaire tries to assess
various aspects, such as the competence of the HRD staff, style of line
managers, efficacy, and user friendliness in implementing various HR
systems. The foremost benefit of the questionnaire is that it helps in
benchmarking the systems and processes.

5. Observations:

Auditors make it a point to visit the workplace, including the plant

machinery room, canteen, and welfare amenities such as hospitals/schools
being run by the management. These visits help the auditors assess the
environment and the welfare orientation of the organization.
Employees will not be giving their best to the organization unless they are
taken care of by being provided with good surroundings and welfare
amenities for themselves and their dependents. These observations are
recorded with the help of a checklist.

18
6. Secondary Analysis:

The analysis of secondary data gives a lot of insight into the state of affairs
in an organization. For instance, an organization may have around 500
programmers in the J2E platform with a number of projects in that area. If
the number of trained people is inadequate, it is an indication that the
organization is not focusing upon building the competencies of the people
working on the projects, leading to a possible drop in quality or standard.

The areas covered under the regulatory compliance audit include:

i. Personal files and record keeping.

ii. Job descriptions.

iii. Compliance with the statutory requirements such as the Compensation

Act, and rules regarding ESI, PF, Gratuity, etc.

Issues in HRD Audit:

The methods of an HRD audit can only be chosen based on the fundamental
data relating to the familiarity of the auditor/consultant to the organization.

19
Some of the issues to be addressed are:

i. Does the auditor have an idea of the business objectives of the

organization?

ii. Is the auditor aware of the competitive dynamics and the relative position
of the organization?

iii. Has the auditor developed sufficient knowledge about the business
environment?

iv. Does the auditor have the competencies and skills required in
understanding tabulating, and analysing the feedback to be collected during
the audit process?

v. Does the auditor have the capability of clarifying the role expectations of
various departments, executives, individuals, etc.?

20
2.2 LIMITATIONS OF HRD AUDIT:

Any audit is undertaken to evaluate the effectiveness of systems and

procedures. The HRD audit is not an exception. However, if the HRD audit
is held due to the directives/fancies of the CEO, it can lead to negative
results. For instance, initially the top management may be very supportive
of the HRD audit process.

However, when the feedback is continuously negative, they may become

hostile and sometimes even aggressive with the auditors. Quite often the
failure of an HRD audit is on account of failure in the implementation of
corrective action based on the feedback. There have been instances when
the HRD audit is used for a negative purpose, such as victimizing the HR
department and removing some of the HR employees.

HR Audit should be voluntary and should be proactively undertaken by the

management. There should not be any compulsion to conduct HR Audit, in
order to facilitate a fair and objective report generation.

An HRD audit does not give an evaluation of the individuals, but it

essentially focuses upon units and systems. However, if consultants so
desire, they can give a formal feedback to the individuals.

21
The Challenges in Human Resource Development Audit:

An HRD audit starts with an evaluation of the HRD strategies, which either
flow from or are aligned with the corporate strategies. But in the absence of
a co-relation between the HR and corporate strategy, HRD audit lacks
direction and gets relegated to becoming a pure administrative and routine
function.

The challenge in the IT and globalized era is to build and sustain world-
class organizations.

Irrespective of the specific strategy followed, organizations have to

address the following challenges:

i. Building and improving quality consciousness.

ii. Striving to recruit and retain competent, creative, and committed

employees.

iii. Aligning the business processes with the technology infrastructure and
leveraging it for competitive advantage.

iv. Nurturing a creative and supportive work culture, which endanger pro-
fessionalism and motivation among the employees.

v. Improving the responsiveness of the organization to environmental

demands.

22
vi. Retaining the flexibility and suppleness of the organization in spite of
growth and development.

vii. Training and developing the people through various interventions such
as training, mentoring, 360-degree feedback, etc.

viii. Promoting learning orientation among the employees and facilitating

the formation of informal networks to create a learning organization.

Using Audit Findings:

How does an organization use HR audit results? Since HR audit results are
classified, an important aspect is already taken care of. Critical needs
should be the first ones to be addressed.

23
Organizations generally have three options for dealing with audit
results:
i. Use the HR audit as a blueprint or action plan for addressing HR needs.

ii. Address as many needs as possible using the organization’s internal

expertise and resources.

iii. Contract out those need areas where internal expertise and resources are
not available or do not fit in the core objectives of the organization.

An HR audit is much like an annual health check-up and performs the same
function for the organization. An audit helps an organization assess where it
currently stands and determine what it has to accomplish to improve its HR
functions. It involves systematically reviewing all aspects of human
resources, usually with a checklist, and ensuring that the government
regulations and company policies are being adhered to.

The key to an audit is to remember that it is a tool to discover and not to

test. There will always be room for improvement in every finding. A formal
audit engagement letter is prepared, containing the objectives, scope, terms
and conditions, time frame for completion, and remuneration for the
auditor.

A confidentiality agreement is also made between the auditor and the

organization. This starts the formal, process of auditing.

24
2.3 OBJECTIVES

1. To conduct an independent, objective, systematic and critical

examination of HR functions of an organization.

2. To assess the general environment and performance efficiency in HR

department.

3. To check for any deviations from standards and devise appropriate

strategies and corrective actions in HR related areas.

4. to check for alignment of HR functions and organization’s overall

practices and procedures.

5. to measure statutory compliances of HR activities as per law and other

relevant agencies.

6. To explore the areas for saving personnel costs and expenses.

7. To provide feedback on better areas of performance and areas that needs

improvement.

8. To identify HR areas that requires research and development inputs.

9. To recognize better performance of HR personnel through rewards.

25
2.4 FEATURES

The essential features of HR audit are:

(1) The measurement and effectiveness HR management’s mission, goals,

strategies, policies, programmes and activities, and

(2) To determine the action plan for future in response to the results from
such measurement.

The primary purpose of audit is to know how the various units are
functioning and how they have been able to meet the policies and
guidelines which were agreed upon; and to assist the rest of the
organization by identifying the gap between objectives and results for the
end product of an evaluation should be to formulate plans for corrections or
adjustments.

26
2.5 NATURE

The nature of Human Resource Audit has been discussed in the

followings:

(i) Human Resource Audit, generally, gives feedback about HR functions

not only to operating mangers, but also to HR department.

(ii) Basically, audit is an overall quality control and checks the HR

activities in a public organisation.

(iii) Human Resource Audit also helps clarify organisational and

management goals.

(iv) It is used as a tool for review of the effectiveness of human resource

practices.

(v) It also helps the management of the organisation to evaluate how well
its policies are going and identifies trouble areas that require particular
attention.

27
Explained ten benefits resulting from Human Resource audit.

These are:

(1) Clarification of the HR department duties and responsibilities.

(2) Ensuring timely compliance with legal requirements.

(3) Creation of increased acceptance of the necessary changes in the HR

department.

(4) Stimulation of uniformity of HR policies and practices.

(5) Encouragement of greater responsibility and professionalism among

members of the HR department
(6) Identification of the contributions of the HR department to the
organisation.

(7) Improvement of the professional image of the HR department.

(8) Finding solution of critical personal problems.

(9) Reduction of HR costs through more effective personnel procedures.

(10) Also review of the department information system.

28
2.6 NEED

According to Yoder, the need for personnel audit is largely influenced by

several conditions.

Some of these are:

a. The Number of Employees- Very small units, because of the very small
number of persons they employ, require comparatively little in the way of a
formal audit.

b. Organisational Structure- Continuing feedback is facilitated if an

organisation has a personnel department.

c. Communication and Feedback- An effective two-way communications

system often reduces the need for a formal audit.

d. Location and Dispersion- The need for a formal audit is directly related
to the number of isolated plants.

e. Status of an Industrial Relations Manager- If he participates in the top

Management plans, reports, discussions and decisions, the need for a formal
audit may be less frequently felt.

f. Administrative Style- The greater the delegation of authority and

decentralisation of power, the greater the value of a regular and formal
audit

29
2.7 SCOPE

Organizational practices regarding the subject matters of HRM audit may

vary.

However, a comprehensive scope of HRM audit includes all aspects of

HRM which are as follows:

1. HR strategies and policies,

2. HRM functions,

3. HR compliance, and

4. HR climate.

30
1. HR Strategies and Policies:

The starting point of HRM audit should be an evaluation of HR strategies

and policies and the way these are in tune with those of the organization.
For formulating HR strategies and policies, it is essential that the objectives
of HRM functions are clearly defined. The audit may evaluate the extent to
which various HR strategies and policies have been formulated and what
their qualities are.

Various HR strategies and policies may be audited by evaluating their:

i. Consistency with the organizational objectives, strategies, and policies;

ii. Consistency with the environment;

iii. Appropriateness in the light of organizational resources;

iv. Appropriateness in the light of time horizon; and

v. Workability.

31
2. HRM Functions:

The major thrust of HRM audit is on evaluation and review of various

HRM functions relating to acquiring and employing human resources,
developing human resources, compensation management, integration and
maintenance of human resources, and industrial relations.

The audit should measure and evaluate these functions in the following
context:

i. The type of HRM functions performed;

ii. The degree to which these functions are related to HRM objectives; and

iii. The degree to which these functions are performed effectively.

32
3. HR Compliance:

HR compliance refers to the adherence to various HR strategies and

policies by line managers and adherence to legal requirements.

In this context, evaluation revolves around the following:

i. The extent to which line personnel adhere to various HR policies in

dealing with personnel working under them; and

ii. The extent to which there is compliance with the legal requirements as
provided under various legal Acts relevant for management of human
resources.

33
4. HR CLIMATE:

Quality of HR climate has important impact on motivation, job satisfaction,

morale, and performance of human resources.

HR climate can be evaluated by various outcomes which are as follows:

i. Degree of employee turnover,

ii. Degree of employee absenteeism,

iii. Degree of accidents,

iv. Status of grievances and disciplinary actions, and

v. Findings of attitude and morale surveys.

34
2.8 IMPORTANCE

In modern times, personnel and industrial relations audits have been widely
accepted as tools with which managers can control the programmes and
practices of the personnel and industrial relations
Department.

The importance of personnel audit has increased in recent years

because of the following reasons:

a. A change in managerial philosophy and theory, as a result of which a

management now feels that employees’ participation in the activities of an
organisation, and their identification with it, have a tremendous influence
on the working of that organisation.

b. The changing role of the government, which intervenes more often and
more extensively now, to control manpower management by an
organisation with a view to protecting the interests of the employees,
providing them with better working conditions and ensuring their economic
security.

c. The increasing role played by trade unions and their strength, as a result
of which they often question managerial competence in industrial relations.

d. The rising wages, changes in the skills of technical and professional

workers, and the increasing expenditure incurred on the industrial relations
department — these are the factors which have influenced and encouraged
the trend in favour of a personnel audit.

35
2.9 PROCESS

1. Determining the Scope and Type of Audit:

Since HR is a very wide field, the company may either choose to conduct a
comprehensive review of all HR functions or it may decide to review a few
specific areas as it deems necessary. For example, a company may choose
to review only the policies and procedures related to recruitment, selection
and orientation policies.

2. Determining the Audit Method:

HR audits are usually conducted by using a questionnaire that elicits

information about the relevant HR areas. The audit may also be conducted
by interviewing managers and employees of the HR department to analyse
how well they have understood the company’s policies and how efficiently
these policies are being implemented. When using a questionnaire, care
should be taken to design it in such a way that it elicits all necessary
information regarding the areas to be audited.

3. Data Collection:

This step includes the actual process of collecting data about the
organization and its HR practices. Information is collected by using the
questionnaire and by interviewing relevant HR personnel about the HR
procedures and policies being used in the company.

36
4. Setting the Standards:

To assess the efficiency of HR functions, the information collected has to

be compared with some pre-determined standards. These standards have to
be pre-set and any acceptable level of discrepancies should be specified
clearly. Comparing the actual results with the standards will give an idea
about the efficiency with which the HR functions are being performed.

5. Feedback about the Results:

After collecting information and comparing the results, the audit team
summarises the findings and provides feedback to the company’s HR
personnel and senior management in the form of an audit report.
The results of the audit should be discussed with the employees of the HR
department so that they are made aware of the present condition of the HR
functions in the company. Discussion with employees will also throw up
new ideas for improving the policies and procedures in future.

6. Develop Action Plans:

Once the results of the audit are out, this information should be used for
improving the working of the HR department. The findings of the audit
should be categorised according to order of importance: high, medium and
low. The organization should examine the areas of weaknesses as revealed
by the audit and find ways to overcome them. Conducting HR audit would
serve no practical purpose if no actions are taken.
37
2.10 FREQUENCY AND TYPES

It is a common practice to have an annual evaluation or audit. At the end of

each calendar or fiscal year, a report is presented; covering statistical
information on the activities performed the results – achieved, the costs and
expenditure involved, and comparisons of objectives and accomplishments.

By a perusal of this report, a great deal of useful information can be had

about personnel activities In some organisations, however, this personnel
audit is conducted periodically, generally in accordance with the needs of
each organisation.

For example, attitude or morale surveys on particular subjects or topics may

be conducted, or special reports may be prepared on such issues as
grievances, the working of seniority rules or the effects of overtime
practices and collective bargaining agreements. Two practices are generally
followed while conducting a personnel audit.

In some cases, the audit is conducted by those employed in the organisation

itself – generally by auditors or accountants.
In other cases the services of outside experts are engaged. The former is
known as internal audit, while the latter is designated external audit. The
advantages of having an outside auditor are that-

38
(a) He has a background of knowledge of what others are doing in similar
situations;

(b) He has a professional attitude toward his work; and

(c) He is objective in that he personally will not become a party to

recommended changes.

While appointing an outside auditor, certain conditions should be kept

in mind regarding his work:

a. He cannot work miracles. He can diagnose ills and recommend treatment,

but the patient must provide the will to get well.

b. He must receive top management’s support.

c. He cannot and should not relieve management of its responsibility for

making the decisions

d. He can recommend, but the acceptance of his recommendations rests

with management.

39
2.11 AREAS

The areas of HR audit include:

i. Mission statement relating to human resource management.

ii. Objectives, goals and strategies of human resource management.

iii. Accomplishments of human resource management.

iv. Programmes of human resource management including the detailed

practices and procedures.

v. Human resource management policies.

vi. Human resource management philosophy, its practices and values.

vii. Responses of employees, trade unions and government to the practices

and achievements.

viii. Role of human resources in total quality management.

ix. Role of human resources management in achieving organisations

mission, objectives, goals and strategies.

40
Human Resource Management Objectives vs. Performance:

Performance of the HRM should be evaluated against the objectives and

strategies formulated earlier. HRM auditor, therefore, should formulate the
questions to be asked based on the HRM objectives. Each activity of HRM
should be assessed by framing the questions.

At this juncture, the questions suggested by Robert D. Gray may be

used as model questions:

The questions suggested by Robert D. Gray are as follows:

(1) What is the philosophy underlying the function?

(2) What principles of management are being followed in carrying it out?

(3) What policies have been established for this function?

(4) What procedures have been established? Are they in line with
philosophy, principles and policies?

(5) Are the procedures, policies, management principles and philosophy of

each function consistent with those of other, related functions?

41
Who will be asking these questions in the formal evaluation, and how?

There are at least five agents and methods to choose from, and, in fact,
all or any combination may be used:

1. Observation by higher management.

2. Formal appraisal by higher management.

3. Group discussion among customers of the personnel department.

4. Opinion polls.

5. Use of a consultant.

In every function or activity of the personnel division at very major

step such questions as the following must be raised and answers
sought:

(1) What is being done?

(2) How is it being done?

(3) Who is doing it?

(4) Where is it being done?

42
(5) How much is it going to cost?

(6) What is the return?

(7) Is it a worthwhile investment?

(8) How does it affect people?

(9) Do we know of a better way of doing it?

(10) Who will be responsible for it?

(11) Are we achieving the results we planned to achieve?

(12) How do the results compare with the objectives?

(13) What modifications are necessary in the light of experience or more

knowledge?

Constant vigilance is necessary in personnel administration, because people

are dynamic and unpredictable. Before you know, programmes may be
rendered obsolete and you are left behind.

43
2.12 ADVANTAGES

(i) HR audit helps the company to identify the areas where improvement is
required.

(ii) It helps to ascertain the proper contribution of the HR department

towards the organization.

(iii) HR audit facilitates the development of HR plans for the future based
on the current performance of the HR department.

(iv) It helps to motivate the employees to perform better and boosts their
morale.

(v) HR audit keeps a check on whether the company is complying with the
required legal rules and regulations.

(vi) The weaknesses of the HR department can be pinpointed by way of HR

audit so that remedial measures may be taken.

(vii) It enables the HR manager to evaluate the job positions and the
employees in order to formulate promotion and transfer policies.

44
DISADVANTAGES

(i) HR valuation methods assume that employees would remain with their
organizations for a specified period of time. But this assumption is wrong
because in reality employees do not remain with one company for long and
often change jobs.

(ii) It is very difficult to establish standards for HRA as in case of other

fields of accounting such as financial accounting or management
accounting. Every organization uses its own standards, and thus the HRA
data of no two organizations can be compared.

(iii) HRA dehumanises the employees by evaluating them in monetary

terms. Human beings cannot be owned or used like machines.

(iv) There is no model of HRA valuation that can be said to be ideal. Each
model has many practical drawbacks.

(v) The life of a human being is uncertain. The lifespan of an employee can
never be predicted accurately, and therefore values can never be assigned to
any employee with surety.

45
 CHAPTER: 3
REVIEW OF LITERATURE

46
3.1REVIEW OF LITERATURE

Studies that because of rapid evolution in product and process technology,

many operations in the manufacturing and service industries in recent years
require workers to acquire and maintain more extensive ``knowledge stock''
than before. In this paper, we address the human resource planning in these
knowledge intensive operations. We focus on the management of
knowledge mix, that is, the mix of workers in different knowledge levels.

This research was conducted in a semiconductor equipment manufacturing

plant that uses an assembly line to achieve high productivity. However, the
plant also needs to increase ability to deal with a high degree of product
customization, frequent technology and product changes, and relatively low
volume of production, which collectively require a high level of knowledge
development for each worker. We extend methodology developed for
managing production and work-in-process inventory levels for a
manufacturing system that is subject to random production yields.

However, the structure of our problem is different, and thus requires a

separate mathematical development. Our results indicate that the company
we studied underestimated the ideal number of workers in the higher
knowledge levels in the steady state. But this problem, by itself, can be
taken care of by a good intuitive heuristic.

47
 We then demonstrate that our control rule is superior to the good intuitive
rule from the point of view of additional stability that is obtained from less
variability in the work force levels. We offer managerial implications of
this additional stability using our computational results.

Human Resource Management has assumed a crucial role in the growth of

the organization. It has become imperative to re-look at this most important
asset of the organization. The main objective behind this research was to
gain in-depth knowledge of the Human Resource and the effectiveness of
HR functions within an organization.

The HR audit in University was planned to get a clear judgment about the
overall status of most faculties/Departments and to find out whether
existing systems and procedures are yielding desired result. This
information will be an invaluable input while making strategic decisions.
The human resource audit involved examining current policies, practices
and strategies of all the departments/faculties to verify the effectiveness and
helping University to improve its productivity, transparency and efficiency.

48
To conduct Human Resource Audit in University extensive study on
various aspects related to faculties, students and staff were analysed and
studied through interviews of staff at various levels, observation of working
of non-teaching staff, taking responses from students and staff by
questionnaire method and documents review at various levels. The first-
hand experience has helped us in our specialization in HR as this enhanced
our prospective of thoughts. The concise suggestions/ recommendations
emerged after in depth analysis and study will provide with a wide scope to
understand the functions and mechanism of working in any organization.

Human resource information system (HRIS) is not new concept but it is

recuperating day by day with changing environment. Its major role is in
human resource planning (HRP) which itself a crucial activity in any
organization. Ineffective HRP can lead to extra or fewer numbers of
employees than needed. Both over and under number of employees can
create crappy situations. HRIS helps in proper planning of human
resources.

49
This paper focuses on the role of HRIS in HRP. The research is empirical in
nature as 127 respondents from top 7 IT companies (as per their market
share) are taken to see the sights of the objectives. The survey is done with
the 50 Volume 16 assistance of the questionnaire. After investigation it is
concluded that HRIS has various benefits but the foremost is HRIS stores
ample data about the employees of the organizations that helps in escalating
the snail’s pace of HRP.

HRIS also helps in the strategic activities of HR managers and more in

training and development, succession planning, applicant tracking in
recruitment and selection and manpower planning. While analysing the
overall contribution of HRIS in HRP it is concluded that HRIS identifies
occupied and unoccupied positions in an organization very effectively and
accurately.

This paper provides an analysis of how labour market indicators can be

integrated into service planning, discusses whether planning is sufficiently
responsive and flexible to retain relevance and validity in rapidly changing
health systems, describes different models and approaches to linking and
integrating workforce planning and service planning, discusses

50
Methodological approaches to integrating planning, and examines effective
approaches to the use of computer based scenario modelling to support
assessment of current and future planning options.

The context and broad cross-cutting themes of public sector, political,

social, and macro-economic changes have been considered. Where
publications exist, empirical evidence serves as the basis for this analysis
and country examples have been highlighted. While strides have been made
in the practice of resource planning world-wide, health human resource
planning in most countries has been poorly conceptualized, intermittent,
varying in quality, profession specific in nature, and without adequate
vision or data upon which to base sound decisions .

Human resources (HR), but get lost because the issues are confusing. What
to measure? How to measure it? When to measure? Where to measure?
These questions make measurement of HR difficult. This article reviews the
history of HR measurement; summarizes how HR measures may be done
for professionals, practices, and functions; and offers specific guidelines for
improving HR measures.

51
The need to map and match specific executive perspectives and
competencies to the future needs of the business is required if executive
search and executive resource planning are to become strategic
management tools. This paper examines the three “drivers” of strategic
leadership and provides a framework for synchronizing specific executive
perspectives and competencies to these three drivers.

A case study illustrates bow common practices such as raiding direct

competitors for executive talent or always promoting from within may be
counterproductive to the strategic needs of the business. Recommendations
for applying

52
 CHAPTER: 4
DATA ANALYSIS

53
4.1 Survey Question

1. Name

2. Gender

 Male
 Female

3. Age

 Below-20 Yrs
 21- 30 Yrs
 31- 40 Yrs
 41 Yrs- above

4. Educational Level

 Under Graduate
 Graduate
 Post Graduate
 Illiterate
 Other

54
5. Occupation

 Students
 Service
 Business
 House Wife
 Retired

6. Annual Income

 Below-50,000
 51,000-1,00,000
 1,00,000-5,00,000
 5,00,000-Above

7. Do you agree that HR function in your organization have developed a

culture that builds team spirit?

 Yes
 No

55
8. Do you feel that the adequate welfare facilities are provided by the HR
department to provide quality of work life provides?

 Yes
 No

9. Do you agree that HR department and organization whenever required

provide proper support and help?

 Yes
 No

10. Are you fully conversant that formal appraisal system exists in your
organization?

 Yes
 No

11. Is the appraisal system effectively designed?

 Yes
 No

56
12. Are the KRAs identified after consultation with the subordinate?

 Yes
 No

13. After the performance appraisal is appropriate feedback provided to

appraise regarding his/her strengths and weaknesses?

 Yes
 No

14. "Good performance is suitably rewarded" is applicable in your

organization?

 Yes
 No

15. Do you agree that HR function in your organization ensure smooth flow
of information between all levels?

 Yes
 No

57
16. Do you feel that organization is concerned about employee satisfaction?

 Yes
 No

17. Do you agree that your seniors help you in planning your work?

 Yes
 No

18. Are your seniors open to suggestions?

 Yes
 No

19. Are you satisfied with current training & development programmes?

 Yes
 No

58
20. Does it help in providing sufficient training to each and every
employee?

 Yes
 No

21. Do you feel that some improvement should be made in the training &
development programmes of the organization?

 Yes
 No

22. Are you satisfied with the overall working of HR department of your
organization?

 Yes
 No

23. Does the HR department convey the organization goals to all employees
of your organization fully?

 Yes
 No

59
4.2 Survey Reponses

2. Gender

 Male
 Female

Gender

33%

Male
Female

67%

60
3. Age

 Below-20 Yrs
 21- 30 Yrs
 31- 40 Yrs
 41 Yrs- above

Age

5%
15%

Below-20 Yrs
35% 21-30 Yrs
31-40Yrs
41Yrs - above
45%

The survey says that the respondents who respondent 21 to 30 yrs are the
highest and 41 above are the lowest.

61
4. Educational Level

 Under Graduate
 Graduate
 Post Graduate
 Illiterate
 Other

EDUCATIONAL LEVEL
Under Graduate Graduate Post Graduate Illiterate Other

10%
0%
25%

25%

40%

62
5. Occupation

 Service
 Retired

OCCUPATION
retired service

30%

70%

The retired peoples who responded to survey is 30%

And 70% are working

63
6. Annual Income

 Below-50,000
 51,000-1,00,000
 1,00,000-5,00,000
 5,00,000-Above

Anuual Income

15% 15%

Below-50,000
51,000-1,00,000
20%
1,00,000-5,00,000
5,00,000-Above
50%

The above pie shows that annual income of the people responding

64
7. Do you agree that HR function in your organization have developed a
culture that builds team spirit?

 Yes
 No

5%

Yes
No

95%

The above pie diagram shows the workers reponse over teamspirit

65
8. Do you feel that the adequate welfare facilities are provided by the HR
department to provide quality of work life provides?

 Yes
 No

10%

Yes
No

90%

The above pie diagram shows the workers reponse over the welfare life
provided by the organisation majority of the peoples agreed to it

66
9. Do you agree that HR department and organization whenever required
provide proper support and help?

 Yes
 No

2%

Yes
No

98%

The above pie diagram shows the workers reponse over the proper support
provided by the organisation majority of the peoples agreed to it

67
10. Are you fully conversant that formal appraisal system exists in your
organization?

 Yes
 No

10%

Yes
No

90%

The above pie diagram shows the workers reponse over the formal
appraisal system in the organisation majority of the peoples agreed to it

68
11. Is the appraisal system effectively designed?

 Yes
 No

13%

Yes
No

87%

The above pie diagram shows the workers reponse over the performance
appraisal system in the organisation majority of the peoples agreed to it

69
12. Are the KRAs identified after consultation with the subordinate?

 Yes
 No

40%
Yes
No
60%

The above pie diagram shows the workers reponse over thekey result areas
(KRA)in the organisation majority of the peoples agreed to it

70
13. After the performance appraisal is appropriate feedback provided to
appraise regarding his/her strengths and weaknesses?

 Yes
 No

10%

Yes
No

90%

71
14. "Good performance is suitably rewarded" is applicable in your
organization?

 Yes
 No

10%

Yes
No

90%

The above pie diagram shows the workers reponse over the welfare life
provided by the organisation majority of the peoples agreed to it

72
15. Do you agree that HR function in your organization ensure smooth flow
of information between all levels?

 Yes
 No

Yes
50% 50%
No

The above pie diagram shows the workers reponse over the smooth flow
of HR functions in the organisation majority of the peoples agreed to it

73
16. Do you feel that organization is concerned about employee satisfaction?

 Yes
 No

17%

Yes
No

83%

The majority of the people agree over the organisation is concerned about
their satisfaction

74
17. Do you agree that your seniors help you in planning your work?

 Yes
 No

10%

Yes
No

90%

The majority of people agree in the above pie that seniors do help them in
work

75
18. Are your seniors open to suggestions?

 Yes
 No

10%

Yes
No

90%

The majority of people agree in the above pie that seniors do respect their
suggestions

76
19. Are you satisfied with current training & development programmes?

 Yes
 No

25%

Yes
No

75%

The majority of people agree in the above pie that they are satisfied with the
current developing programs

77
20. Does it help in providing sufficient training to each and every
employee?

 Yes
 No

10%

Yes
No

90%

The majority of people agree in the above pie that they are been trained
properly

78
21. Do you feel that some improvement should be made in the training &
development programmes of the organization?

 Yes
 No

30%

Yes
No

70%

Yes their need to be some improvement made in the organization

79
22. Are you satisfied with the overall working of HR department of your
organization?

 Yes
 No

Yes
50% 50%
No

The above pie shows the 50% 50% response over the working of the HR
department

80
CHAPTER: 5

81
 5.1 CONCLUSIONS

At the conclusion of the audit, HR leaders must engage in constant

observation and continuous improvement of the organization's policies,
procedures and practices so that the organization never ceases to keep
improving. This will ensure that the company achieves and retains its
competitive advantage.

The main functions of human resources audit are to take specific actions
that will help minimize employee turnover orientation training, working
conditions, remuneration and benefits and opportunities for advancement.
Therefore, quality of turnover is more important than the quantity of people
leaving and joining the industry. Human resources management should
create a work environment to make employee realize that it makes a sense
to work in the industry rather than staying at home and waste their time.

HRD Audit is a comprehension evaluation of the current HR strategies,

structure, style and skills in the context of the short and long term business
plans of a company. Its main objective is to align the HR function with
business goals or to create a business driven HR function. Conclusions a
Human Resource audit can be used

82
Conclusions a Human Resource audit can be used as a measure to evaluate
the personnel activities of an organization. It gives feedback about the HR
functions to operating managers and HR specialists. It also provides
feedback about how well managers are meeting their HR duties.

In short, the audit is an overall quality control check on HR activities in a

division or company and an evaluation of how these activities support the
organization’s strategy. HR Audit also gives feedback HR compliance with
the legal provisions and company’s policies. HR audit proved that HR
climate has an impact on employee motivation, morale and job satisfaction.
So we can conclude that:

HR Audit can be performed through the measurement of the effectiveness

of the HR functions of an organization. Human Resources are complied
with the managerial policies, procedures and legal provisions. The Human
Resource Management's climate has an impact on employee motivation,
morale and job satisfaction.

83
 5.2 SUGGESTION

Changing culture requires leaders to understand the learning process

dynamics and how the learning and unlearning of assumptions and beliefs
can be manipulated to modify human needs and behaviour.
Effective HR audit requires equal standards against which procedures and
implementation of policies are assessed. In the absence of equal standards,
policies are assessed with subjectivity, which may destroy the process of
audit.
One training program should not be designed to serve a numerous of
purposes because it may be unclear and difficult & results into failure. The
solution is to separate training and assessment program should be designed
for development of employees.
HR planning should be job-related. Job description should be given to the
employees. Bring them into the line of organization's goals with the job
objectives so that every employee’s work lead to the organizational goal.
Since the goal of HR planning system is to achieve the organizational goal.
Hence there is immense need to coach the employee before and after
appointment regularly. Provide the resources required by them to get to the
management's expectations.
Deliver training and development for new and experienced employees that
enhances critical competencies and behaviours.

84
Create career development systems that identify, prepare, and promote
employees whose experience and skills match the demands of higher-level
positions.
When management establishes targets in their human resource plan,
management should ensure that strategies are established to achieve those
targets.
Suitable policies and procedures to support the development and
management of human resources are established, maintained, and
communicated.
HEG should consider developing a multi-year integrated business and
human resource plan for the department that is adjusted annually to reflect
the priorities of the current year.
HEG must consider all the available options for strategically promoting job
openings and encouraging suitable candidates to apply.
Determine the gap between where your organization wants to be in the
future and where you are now. The gap analysis includes identifying the
number of staff and the skills and abilities required in the future in
comparison to the current situation.
HR Planning and audit objectives can be achieved successfully when there
is a link or alignment between organizational and unit objectives so to avoid
the conflict between team and organization's objectives.

85
 5.3 REFERENCE

Library Books

Auditing

Essentials of HRM and Industrial Relation

Human Resource Planning And Audit

Strategic Human Resource Management: A General Managerial

Approach

HRD Audit: Evaluating the Human Resource Function for Business

Improvement

Auditing Your Human Resources Department

86
 5.4 BIBLIOGRAPHY
Shiri, S. (2003). Strategic role in HR audit in organizational effectiveness.
Journal of Management & Public Policy,

Spognardi, M. A. (2005). Conducting a human resource audit: A primer.

Employee relations Law Journal

Pareek, U. (2008). Evaluation of HRD Functions (A brief note in evaluating

human resource development). Jaipur: HRD Research Foundation

Batra, G.S.(2010).Human resource auditing as a tool of human resource

evaluation: Interface and emerging practices. Managerial Auditing Journal,

Dessler, G., &Varkkey, B.(2015).Fundamentals of human resource

management:Content,competencies and applications. Noida, India: Dorling
Kindersley (India) Pvt. Ltd.

Dev, T.(2017).Managing human resources and industrial relations. New

Delhi, India: Excel Books.

Durai,P.(2018).Human resource management. Noida, India: Dorling

Kindersley (India) Pvt. Ltd.

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88