HR Audit and Accounting

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ANNOTATED OUTLINE

INTRODUCTION
Personnel records and reports enable managers to obtain requisite
information regarding the use of human resources in various
departments or divisions.

Helps in finding out the usefulness of personnel prog. and practices

followed by org.

Inadequacies and deficiencies could be traced and rectified

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Essentials of a good record and report
Record
1. Accurate: Records should be error-free.
2. Economical: It should not cost a fortune
to maintain records. The cost of maintaining
in a
3. Useful: Records must provide information which could
be put to use. They must facilitate managerial decision
making. To this end they must be reviewed and kept
some up-to-date.
used.
the time
Personnel Records, Audit And Research
Report
1. Unbiased: objective, without prejudice
2. Data based: Reports must be built
around facts but interpret them
meaningful manner.
3. Clarity and Simplicity: The report must
be clearly worded so that people could
use it easily. To make it simple,
illustrative points could also be
4. Timely: Reports must be submitted
keeping the time limits in mind. The
very purpose of preparing a report
gets defeated once it exceeds
limit.
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Types of Personnel Records

 job application and test scores

 job descriptions and job specifications
 interview results
 employment history
 medical reports
 attendance records
 payroll
 employee ratings
 training records
 leave records
 accident and sickness records
 grievances, disputes records
 contracts of employment

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Records Management

The purposes of records management may be listed thus

 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
 To meet legal requirements
 To serve other miscellaneous purposes

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Fundamental principles of record

keeping
For effective records management, record keeping must
 Justification – purpose must be justified; some try to record all
the information, assuming that it will be useful at future date; mass of
voluminous records, inc. cost
 Verification – should not be based on hearsay or rumors, serve
no evidence in court of law, no help in taking correct decisions
 Classification – acc. to time and subject, avoids waste of time in
extended search
 Availability of required information – shortest possible time
 Reasonable cost - hell-bent on managing voluminous data,
should maintain more valuable ones and control cost in less
valuable

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Significance of Personnel records

Personnel records play a significant role in performing various personnel functions

including audit and research. They are specially needed to:
i. supply the information required by the management and trade unions to
review the effectiveness of personnel policies and practices and develop
them.
ii. supply the information required by various agencies on the accidents,
employment position, strikes, absenteeism, turnover, etc.
iii. provide the information about manpower inventory for manpower planning and
succession planning.
iv. conduct research in personnel and industrial relations areas.
v. identify training and development needs.
vi. revise pay scales and benefits from time to time.

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Personnel/Human Resource Audit

Reports and records provide inf. regarding utilization of HRs, however,

not sufficient

Critical evaluation is req. to find out areas needed to set things in order.

It is a systematic evaluation of personnel policies, procedures and

practices. Basically it covers three things:

 Measurement and evaluation of personnel programmes, policies

and practices
 Identification of gap between objectives and results
 Determination of what should or should not be done in future.

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Personnel/Human Resource Audit

Why personnel audit? – no legal

obligation

 Changing philosophy of management towards human resources

 Increasing strength and influence of trade unions
 Increasing dependence of the organisation on the human
resources system and its effective functioning.
 Changing HR philosophy - to know how units are functioning
 able to meet guidelines which were agreed upon

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The audit process

Various personnel policies, procedures and practices can be evaluated by

posing questions like:
 What are they (policies, procedures, practices)
 How are they established, communicated and understood
 Are they consistent with other management philosophies and HR philosophy
 What are the controls that exist for ensuring their effective and uniform
application.
 What measures exist to modify them?
•Personnel audit can be carried out either by attitudinal survey or by
interpreting data.
•It can be undertaken at frequent intervals.
•either by internal people or by external consultants.
•To be effective, personnel audit should focus attention on rectifying
things rather than fault-finding.
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The audit process

Effectiveness ratio:
No. of emp. to total output in general
Sales per employee in rupees
Output per employee in units
Scrap loss per unit
Payroll cost by unit per employee
Accident ratio:
Frequency of accident
Compensation paid per accident
Average cost of accident
Accident type
Labour Relations Ratio:
No. of grievances held
Turnover and Absenteeism Ratio:
Attendance, Overtime, Leaves granted
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The audit process

Frequency of Audit:
Top mgmt. thinks of only when serious crisis occurs like strikes, increase in
grievances or magnitude of grievances – post mortem
Regular prog. – help mgmt. find some significant trends, the prob. of serious events
hitting the org could be visualized, Ensure smooth running, controlling stressful
situation, conflicts and crises.
Report: auditor has to record observation, findings, recommendations for the
improvement of practices.
Table of contents
Preface
Objective, methodology, techniques, scope
In depth analysis – area wise, dept wise
Findings and suggestions
Appendix – supporting data and information which is not necessary in the man part
Bibliography – imp books journal necessary for future readings
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Personnel Research

Personnel research implies systematic investigation into any aspect

of personnel or human resource management in a systematic way.
The major objectives of personnel research include:
 Measure current conditions in human resource management
 Evaluate effects and results of current policies and practices
 Discover ways and means of strengthening the abilities and
attitudes of employees at a high level and on a continuing basis
 Provide an objective basis for revising current programmes and
activities

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Techniques to carry out personnel

research
Personnel research can be undertaken through:
 Historical studies
 Case studies
 Survey method
 Statistical studies
 Mathematical models
 Simulation methods
 Action research methods
Personnel decisions can be improved through personnel research
because better information leads to better solutions. Personnel
research can offer valuable insights for managers as they attempt to
increase employee productivity and satisfaction while reducing
absenteeism and turnover.
Personnel Records, Audit And Research
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ANNOTATED OUTLINE

INTRODUCTION
Human resource account is accounting for people as an
organisational resource.

It involves measuring the costs incurred by organisations to recruit,

select, hire, train and develop human assets.

It also involves measuring the economic value of people to the

organisation.

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Advantages

 Throws light on the strengths and weaknesses of the existing

workforce in an organisation. This, in turn, helps management in
recruitment planning.
 Offers valuable feedback to managers regarding the
effectiveness of HR policies and practices.
 Helps potential investors judge a company better on the strength
of the human assets utilised therein
 Helps management in taking proper decisions regarding the use
of human assets in an organisation.

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Limitations

 Not easy to value human resources in an organisation

 Full of measurement problems
 Employee and unions do not like the idea
 Empirical evidence does not support the idea

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Approaches To Human Resource

Accounting
Monetary measures
 Historical cost method
 Replacement cost method
 Opportunity cost method
 Economic value method
 Asset multiplier method
 Discounted present value of future earnings method
Non-monetary measures
 Expected realisable value method
 Discounted net present value of future earnings

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Approaches to analyse and control

manpower
Some of the widely used approaches to analyse and control
manpower costs may be listed thus;
 Management by objectives
 Ratio analysis
 Cost of recruitment
 Recruitment cycle time
 Cost of turnover
 Cost of training
 Personnel productivity
 Personnel reports, budgets and audit

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Human Resource Information System

The human resource information system is a method by which an

organisation collects analyses and reports information about people
and jobs. HRIS is designed, basically, to meet the following
objectives:
 Offer adequate, comprehensive and on going information system
about people and jobs
 Supply up-to-date information at a reasonable cost

 Offer data security and personnel privacy.

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Benefits of HRIS

HRIS can process, store and retrieve enormous quantities of data in an economical
way.
 The records can be updated quickly.
 There is improved accuracy.
 HRIS can greatly reduce fragmentation and duplication of data.
 Information can be readily manipulated, merged and disaggregated in
response to special and complex demands and presented promptly.

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Important uses of a Human Resource

Information System
Labour relations HR planning and analysis
 Job posting
 Organisation charts  Internal job matching
 Union negotiation rewards
 Staffing needs  Job description tracking
 Attitude survey results
 Skills inventories  Workforce utiliz
utilization
 Eeit interview analysis
 Turnover analysis  Availability analysis
 Employee work history
 Absenteeism analysis HR Development

 Employee training profits

 Trainings needs
assessment
 Succession planning
Health,
Health, Safety
Safety and
and Security
 Career interests and
 Safety train in g HRIS experience
 Accident rewards
Staffing
 Employee health record
 Compliance with various  Recruiting Sources
acts  Application tracking
Per
Performance Appraisal  Job offer refused analysis

Compensation and Benefits

 Employee competency
data  Pay structures
 Matching a ctual  Wa r e/salary administration
performanc e with  Benefit plans and usage
standards analysis
 Vacation usage
 Implementing legal
stip ulations

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Human Resource Information System

Computerised HRIS
A computerised HRIS is designed to monitor, control and influence
movement of people from the time they join the organisation till the
time they decide to leave the organisation.
 Recruitment information
 Personnel administration information
 Manpower planning information
 Training information
 Health information
 Appraisal information
 Payroll information
 Personnel research information

Human Resource Accounting And Information System