8 Steps in Implementing a Successful HR Audit for a Company

Minakshi Bindhani

14 Mar, 2023

The audit is all about identifying the shortcomings, lapses, and gaps in the function of a system. In the same way, Human resources also undergo the process of auditing every year so that the performance of the HR department in a company in terms of compensation, payroll management, selection process and other processes are carried out at its best and reducing the organization’s liability as a whole.

Auditing is a tool that helps to understand an organization to determine if a particular function is operating where it is meant to and covering everything it is chartered to cover. It helps a manager to identify the improvement needs. 

It is a comprehensive method to verify the current human resource procedures, policies, documentation and system to enhance the HR function while ensuring compliance with the ever-changing rules and regulations. An audit is about systematically reviewing all aspects of human resources as a function, usually in a checklist function.

In an organization, auditing is a practical act of the findings, evolving and developing a function supporting the company’s Mission and Vision.

Purpose

• Ensuring compliance of the company’s working with the governing laws
• Helping the HR Department understand how to improve itself
• Reviewing and the proper resource allocation for human resources
• Being an act of “due diligence” for potential investors and stakeholders of a company
• A basis for improvements in the future

These were some of the purposes for conducting audits.

What are the steps of the HR Audit Process?

An audit reviews an organization’s essential human resources functions to determine compliance with state and federal regulations. The audit allows businesses to identify potential human resources compliance issues and establish HR best practices. It is similar to a financial or tax audit for businesses.

1. Identifying the objectives of the audit
   The audit assesses the functions and activities to be carried out under the HR department. The audit’s aim, schedule, and planning should move on the same track. It is necessary to ensure that these strategies align with corporate strategies.
2. Planning
   An auditor should know what to do before implementing the auditing process. An assessor should have a rough idea of the required staffing, expected costs, and equipment for the audit procedure. The relevant information is gathered to prepare a framework.
3. Collecting  Data
   An auditor must have appropriate information about internal and external factors influencing the auditing process. External factors include the competency level of the particular organization, the legal environment and the entire summary of the organization. This information is known as background data or background data
4. Determining the technique of data compilation
   Some of the techniques used for data collection are the interview method, the questionnaire method, the task force method, the observation method, etc. Auditors can opt for one or more than one techniques at a time.
   Besides this, the time required and assessment cost are also decided in advance so that the auditing process can occur effortlessly and effectively.
5. Finalizing the audit plan
   Suppose there is a requirement for any improvement in the rough audit plan; changes are made at this stage before finalizing it. Background data and knowledge gained can also help upgrade the pre-Figure
6. Collection of audit data
   In this process, the assessor gathers all the relevant information from various sources and combines it to analyze the weaknesses and strengths of the HR department.
   After receiving all the relevant data, the auditor verifies the data collected from human resource management with the final audit plan.
   At this stage, the assessor must give data accurately for the audit function to go smoothly.
7. Developing an audit report
   After gathering all the data regarding HR functioning, an assessment programme is conducted within different areas of the HR department.
8. Decision making
   The final stage is when the organization makes appropriate decisions after seeing the final audit report^[1]. Management even asks for auditors’ recommendations to make decision-making easier for them.
   Some changes are required to set the objectives of the HR department, strategies or performance of the employees. In that case, the auditor’s suggestions can be very constructive for the authorities.

Conclusion

An HR audit is not a standard technique for resolving issues. On the other hand, it provides information on the sources of present and future difficulties. The findings of these audits are usually internal records that do not need to be shared with the public, and they enhance decision-making within the organization.

Also Read:
What exactly is an HR Audit
Detailed Overview of HR Audit Process for a Business