Human Resource Accounting & auditing
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Transcript of Human Resource Accounting & auditing
HUMAN RESOURCE HUMAN RESOURCE ACCOUNTINGACCOUNTING
PREPARED BY :PREPARED BY : SUDHANSHU SHARMASUDHANSHU SHARMA
MBA-II sem.MBA-II sem.H.I.M.C.S.H.I.M.C.S.
DEFINITION OF DEFINITION OF H.R.ACCOUNTINGH.R.ACCOUNTING
Human Resource Accounting is, “ The process of Human Resource Accounting is, “ The process of identifying and measuring data about human resource and identifying and measuring data about human resource and communicating this information to intrested parties ”communicating this information to intrested parties ”
- - AMERICAN ACCOUNTING ASSOCIATION COMMITTEEAMERICAN ACCOUNTING ASSOCIATION COMMITTEE
HISTORICAL DEVELOPMENT OF HISTORICAL DEVELOPMENT OF H.R.ACCOUNTINGH.R.ACCOUNTING
According to Eric G FalmholtzAccording to Eric G Falmholtz
FIRST STAGE (1960-1966)FIRST STAGE (1960-1966) – –
begening of academic interest in the area of HRAbegening of academic interest in the area of HRA
SECOND STAGE (1966-1971)SECOND STAGE (1966-1971) – –
The focus here was more on developing and validating The focus here was more on developing and validating different models of HRAdifferent models of HRA
Cont..Cont..
THIRD STAGE (1971-1976) –THIRD STAGE (1971-1976) –
This period was marked by a widespread interest in the field of HRAThis period was marked by a widespread interest in the field of HRA. . R.G.Barry experiments contributed substantially during this R.G.Barry experiments contributed substantially during this stagestage
FOURTH STAGE (1976-1980) –FOURTH STAGE (1976-1980) –
TThis was the period of decline in the area of HRAhis was the period of decline in the area of HRA
FIFTH STAGE (1980 onwards ) –FIFTH STAGE (1980 onwards ) –
There was a sudden renewal of interest in the field of HRAThere was a sudden renewal of interest in the field of HRA
OBJECTIVES OF H.R.ACCOUNTINGOBJECTIVES OF H.R.ACCOUNTING Provide cost value information about acquiring, developing, Provide cost value information about acquiring, developing,
allocating and maintaining HR.allocating and maintaining HR. Enable mgmt.to effectively monitor the use of HR.Enable mgmt.to effectively monitor the use of HR. Find whether human asset is appreciating or depriciating Find whether human asset is appreciating or depriciating
over a period of time. over a period of time. Assist in the development of effective management Assist in the development of effective management
practices.practices. To motivate individual persons in the organization to To motivate individual persons in the organization to
increase their worth by training.increase their worth by training. In planning physical resource In planning physical resource vis-à-vis vis-à-vis HR by giving valuable HR by giving valuable
information.information.
PURPOSE OF HR ACCOUNTINGPURPOSE OF HR ACCOUNTING
Use ofUse of resources to achieve the immediate and long-run resources to achieve the immediate and long-run goals of the organization.goals of the organization.
Traditional accounting involves treatment of human capital Traditional accounting involves treatment of human capital and non-human capital differently.and non-human capital differently.
Conventional treatment on human resource.Conventional treatment on human resource.
USES OF HR ACCOUNTINGUSES OF HR ACCOUNTING
according to Grojer and Johansson-according to Grojer and Johansson-
As a political tool, used to demonstrate mismanagement of As a political tool, used to demonstrate mismanagement of human resource.human resource.
As a pedagogical instrument for analyzing and structuring.As a pedagogical instrument for analyzing and structuring.
As a decision making aid to ensure that decision on HR are As a decision making aid to ensure that decision on HR are more rational from the management point of view.more rational from the management point of view.
ADVANTAGES OF HR ACCOUNTINGADVANTAGES OF HR ACCOUNTING
Foresee the changesForesee the changes Provides different methods of testingProvides different methods of testing Increase productivityIncrease productivity Brings high returnBrings high return Helps individual employee to aspireHelps individual employee to aspire Provides scope for advancementProvides scope for advancement Throws light on the strength and weaknesses of the Throws light on the strength and weaknesses of the
existing workforceexisting workforce Helps potential investor judge a companyHelps potential investor judge a company
LIMITATIONS OF HR ACCOUNTINGLIMITATIONS OF HR ACCOUNTING
Not easy to value human asset.Not easy to value human asset. Results in dehumanizing human resource.Results in dehumanizing human resource. No evidence.No evidence. HR is full of measurement problem.HR is full of measurement problem. Employees and Unions may not like the ideas.Employees and Unions may not like the ideas. Unrealistic.Unrealistic. Lack of Empirical evidence.Lack of Empirical evidence.
ASSUMPTIONS UNDERLYING ASSUMPTIONS UNDERLYING H.R.ACCOUNTINGH.R.ACCOUNTING
People are valuable organizational resource.People are valuable organizational resource.
Human Resource value is influenced by management Human Resource value is influenced by management style.style.
HRA information is needed.HRA information is needed.
METHODS OF H.R.ACCOUNTINGMETHODS OF H.R.ACCOUNTING
* * COST APPROACH-COST APPROACH- - Historical Cost Approach- Historical Cost Approach - Replacement Cost- Replacement Cost - Standard cost method- Standard cost method - Present value- Present value - Opportunity Cost method- Opportunity Cost method - Economic Value method- Economic Value method
* * ECONOMIC VALUE APPROACHECONOMIC VALUE APPROACH
HUMAN RESOURCE AUDITHUMAN RESOURCE AUDIT
The word ‘AUDIT’ comes from the latin verb ‘audire’ The word ‘AUDIT’ comes from the latin verb ‘audire’ which means, to listenwhich means, to listen
““HR Audit is a tool which helps assesss effictiveness of HR Audit is a tool which helps assesss effictiveness of HR functions of an organization.”HR functions of an organization.”
NATURE OFNATURE OF HUMAN RESOURCE AUDIT HUMAN RESOURCE AUDIT
HRM Activities
HRM Audit HRM Outcomes
• Ensure compliance
• Improve HR practices
• Train your managers
• Prepare for potential government audit or litigation
• Gain an understanding of department’s environment
• Show a “good faith effort”
• Correct errors
WHY CONDUCT AN HR AUDIT ?WHY CONDUCT AN HR AUDIT ?
SCOPE OF AUDITSCOPE OF AUDIT Audit of human resource function.Audit of human resource function.
Audit of managerial compilance.Audit of managerial compilance.
Audit of human resource climate.Audit of human resource climate.
- - Employee turnover.Employee turnover.
- Absenteeism.- Absenteeism.
- Safety records.- Safety records.
- Attitudes survays.- Attitudes survays.
Audit of corporate strategy.Audit of corporate strategy.
BASIC PRINCIPLES OF AUDITS
1. Identify the Scope
2. Develop a Questionnaire
3. Collect Data
4. Benchmark Findings
5. Provide Feedback about Results
6. Create Action Plans
7. Foster Climate of Continuous Improvement
APPROACHES TO HUMAN APPROACHES TO HUMAN RESOURCE AUDITRESOURCE AUDIT
Comparative Approach,Comparative Approach, Outside Authority Approach,Outside Authority Approach, Statistical Approach,Statistical Approach, Compliance Approach, andCompliance Approach, and Management By Objectives (MBO) ApproachManagement By Objectives (MBO) Approach
TYPES OF AUDITTYPES OF AUDIT
INTERNAL AUDIT : INTERNAL AUDIT :
The internal audit is conducted by the company's own ataff as The internal audit is conducted by the company's own ataff as a part of their control activities.a part of their control activities.
EXTERNAL AUDIT :EXTERNAL AUDIT :
The external audit is conducted by outsiders specifically The external audit is conducted by outsiders specifically employed for this purpose. The advantage is to get the employed for this purpose. The advantage is to get the unbiased evaluation by competent people of the manpower unbiased evaluation by competent people of the manpower management function.management function.
1. Determine who will conduct the audit.
Internal vs. External
2. Secure senior management commitment.
a. Are they ready to fix what’s broken, even if it costs $$$$?
b. Do they agree with the methodology?
c. Will they allow access to all departments/information?
d. Will they publicly support the process?
BEFORE YOU BEGAIN THE AUDIT BEFORE YOU BEGAIN THE AUDIT PROCESSPROCESS : :
Before you begin the audit Before you begin the audit process…process…
3. Define the parameters.
a. Who will be audited?
b. What do you want to audit?
c. What audit tools will you use?
d. How will the process be rolled out?
e. How will results get reported?
f. Who will get the results?
4. Introduce the audit process to your managers.
H.R.AUDIT PROCESSH.R.AUDIT PROCESS
PRE-AUDIT INFORMATION
PRE-AUDIT SELF ASSESSMENT
ON-SITE REVIEW
RECORDS REVIEW
AUDIT REPORT