HUMAN

RESOURCE
ACCOUNTINGAND
AUDIT PREPARED BY :
KRISHNA MISHRA
(73)
KESHAV KUMAR (75)
BIKASH KR.
GUPTA(76)
KK GUPTE (77)

Human ResourceAccounting is,

Theprocess ofidentifying and
measuring data about human resource
and communicating this information
to interested parties.

HISTORICAL
DEVELOPMENTOFH.R.ACCOUNTING

ccording to Eric G Falmholtz

FIRST STAGE (1960-1966):

beginning of academic interest in the area of
HRA

SECOND STAGE (1966-1971):

-The focus here was more on developing and
validating different models of HRA

Cont..

IRD STAGE (1971-1976):

This period was marked by a widespread interest in

the field of HRA R.G.Barry experiments contributed
substantially during
this stage

FOURTH STAGE (1976-1980):

This was the period of decline in thearea of HRA

FIFTH STAGE (1980 onwards ) :

There was a sudden renewal of interest in the
field of HRA

ASSUMPTIONS
UNDERLYINGH.R.ACCOUNTING

People are valuable organizational resource.

Human Resource value isinfluenced by
management style.
HRA information is needed.

BJECTIVES OFH.R.ACCOUNTIN
Provide cost value information about acquiring,
developing,
allocating and maintaining HR.
Enable mgmt. to effectively monitor the use of
HR.
Find whether human asset is appreciating or
depreciating
over a period of time.
Assist in thedevelopment of effective
management
practices.
To motivate individual persons in the
organization to

PURPOSE OF HR ACCOUNTING
Use ofresources to achieve the

immediate and
long-run goals of the organization.
Traditional accounting involves
treatment
ofhuman capital and non-human capital
differently.

Conventionaltreatmentonhumanresource

USES OF HR ACCOUNTING
According to Grojerand Johansson As a political tool, used to demonstrate
mismanagement
ofhuman resource.
As a pedagogical instrument for analyzing and
structuring.
As a decision making aid to ensure that decision
on HR are
more rational from the management point of
view.

METHODS OF H.R.ACCOUNTING

-Historical Cost Method

-Replacement Cost Method
-Standard cost method
-Opportunity Cost method
-Capitalization Of Salary Method
-Economic Value method
-Discounted Present Value of Future Earning
Method

Discounted Present Value of

Future Earning Method This method recognizes human as
wealth producing source of income.
Steps Employees are classified into
homogeneous groups
Earnings of each groups estimated.
There present value of earnings
calculated.

Help management in recruitment

planning.
Provides valuable feedback to
manager.
Helps in decision making.
Helps potential investor judge a
company.

LIMITATIONS OF HR ACCOUNTING
Not easy to value human assets.
HR is full of measurement problem.
Employees and Unions may not like the
idea.
Lack of Empirical evidence.

HUMANRESOURCE
AUDIT
ThewordAUDITcomesfromtheLatin
verb
audilewhich means, to listen
HR Audit is a tool whichhelps assess
effectiveness ofHR functions ofan
organization.

HUMANRESOURCE
AUDIT

WHY CONDUCT AN HR
AUDIT ?

Ensure compliance
Improve HR practices
Train your managers
Prepare for potential government audit or
litigation
Gain an understanding of departments
environment
Show a good faith effort
Correct errors

NATURE OFHUMAN
RESOURCE AUDIT

ud i
A

RM

e
i
t
i
tiv
c
A

e
M

m
R
H ut c o
O
s

SCOPE OF AUDIT
Audit of human resource function.
Audit of managerial compliance.
Audit of human resource climate.
-Employee turnover.
- Absenteeism.
-Safety records.
- Attitudes surveys.

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
RESOURCE AUDIT RESOURCE
AUDIT
Comparative Approach,
Outside Authority Approach,
Statistical Approach,
Compliance Approach, and
Management By Objectives (MBO)

TYPES OF AUDIT

NTERNAL AUDIT :
The internal audit is conducted by the
company's own staff as a part of their control
activities.

XTERNAL AUDIT :

The external audit is conducted by outsiders

specifically employed for this purpose. The
advantage is to get the unbiased evaluation by
competent people of the manpower
management function.

BEFORE YOU BEGAIN THE

AUDIT PROCESS:
1.Determine who will conduct the
audit.
Internal vs. External

2.Secure senior management

commitment.
a. Are they ready to fix whats broken, evenif

itcosts $$$$?
b. Dotheyagree with themethodology?
c.
Willtheyallowaccesstoalldepartments/informat
ion?

3.Define the parameters.

a. Who will be audited?
b. What do youwant to audit?
c. What audittools will youuse?
d. How will theprocess be rolled out?
e. Howwillresultsgetreported?
f. Whowillgettheresults?
4. Introduce the audit process toyour
managers.

H.R.AUDIT
PROCESS

PRE-AUDIT INFORMATION
PRE-AUDIT SELFASSESSMENT
ON-SITE
REVIEW
RECORDS
REVIEW

AUDIT REPORT