Human Resource department is responsible for managing resources related to employees in every organization be it a startup or an established company. Every organization put forth much effort and expense to develop human resources policies, practices, and procedures that are both aligned with the organization’s culture and employment law. As the market trends keep changing and evolving and as company adapt to such changes, they make changes in policy and procedure and it is important to perform frequent reviews to ensure that everything is followed as per process, which can be only determined by regular audits.

What is HR Audit:

The audit itself is a diagnostic tool, not a prescriptive instrument. It helps in identifying what is missing and needs to be improved. Audit can be as simple as reviewing employment files to ensure that they are in order or it can involve reviewing effectiveness of HR policies, which may include interviewing supervisors, managers and employees.  It also helps to find out gaps/ discrepancies and identify potential problems and lead to the institution of timely corrective measures. HR Audit can be done in any size of the organization.

Objective of HR Audit:

• To review the performance of the Human Resource Department and its relative activities to gauge the effectiveness of policy implementation to meet Organizational goals. 
• identify the gaps, lapses, irregularities, short-comings, in the implementation of the Policies, procedures, practices, of Human Resource Department and to suggest way forward.
• To suggest corrective steps to rectify the mistakes, shortcomings if any.
• To evaluate the Personnel staff and employees with reference to the Performance Appraisal Reports and suggest suitable recommendations for improving the efficiency of the employees.
• To evaluate the job chart of the of all departments and ensure data and documents are as per process and guidelines for effective Management of the Human resources

When to Conduct an Audit:

Knowing when to schedule an audit can be organizational decision but most often, they should be conducted on a regular basis (yearly is suggested) whether or not you sense any actual problems. An audit is a chance to not only root out existing issues, but also to assess what your organization is doing well and what you could do differently to increase efficiency or reduce costs. Depending on size of organization audits are conducted. When the size of company is small, they tend to conduct internal audits or cross functional/department audit and some companies prefer external auditors or outsource team depending on cost required and time taken to conduct the audit.

Process for Conducting Audit:

1. Preparing Audit Plan:

Audit team need to determine the time frame for the audit along the target areas for review and notify the team member and gather necessary documents listed in preliminary audit checklist. These documents may include a copy of the previous audit report, Employee personnel files, Attendance data and other HR records. 

2. Reviewing Documents and Field work:

Auditors may also perform sample document checks, to make sure the company’s document creation and retention practices are as per policy and may also conduct field work to interact with employees to investigate company policies and procedures. Internal controls are evaluated to make sure they’re adequate. The auditor may discuss problems as they arise to give the organization an opportunity to respond.

3. Drafting Audit Report:

When the auditing team completes the fieldwork and document review, the auditors prepare an audit draft report. Report includes missing documents or discrepancy in data or attendance of employee or additional finding is mentioned.

4. Management Response/Feedback:

Close ended meeting is conducted including HR, Senior management and Auditors and final document is submitted for final review. The draft report is circulated among the team for review and provide feedback. Moreover, from this final analysis, the audit team can create a timeline for action plan to address the issues and implement projected completion date.

5. Exit Meeting:

Following the management response formal Exit meeting is scheduled with the department to close any existing loose ends or answer questions, discuss the management response and prepare a formal Final audit report. .

Quick Tips to Improve Audit:

HR leader must involve in Audit observation and focus for continuous improvement to get better audit score. HR department must timely review organization’s policies, procedures, and practices So, the organization never stops improving. And, this will ensure that the company achieves and retains its competitive advantage. Below are few quick tips which will help you:

• Monthly Audit report:

Reviewing monthly checklist and audit points to determine department position.  Review and monitor all HR data and ensure they are up to date and there is no backlogs. This help you to track your position on monthly basis and help you during Final audit. Maintain proper score card that displays a score based on the activities performed and corrective measures adopted.

• Internal Audit team:

Designate someone from internal HR team/Other department for monitoring audit development. Organization can also plan inter departments audit monthly or Quarterly to identify the audit finding and to ensure all documents and data is in place as per policy and procedure required to conduct audit.