SEMINAR ON HR ACCOUNTING AND AUDIT

PRESENTED BY, M.SHANMUGA PRIYA MBA I YEAR

HR ACCOUNTING
Human resource accounting is a system which recognizes the human resources as an asset and records it in the books of accounts. Human resource accounting is a system devised to asses and communicates the value of human resource of an organization.

DEFINITION
According to American Accounting Association Committee, Human resource accounting is the process of identification and measuring data about human resource, and communicating this information to interested parties.

CHARACTERISTICS
HRA is a system of accounting in which identification of human resources is made. It involves measurement of cost and value of human resource is made. It involves recording the valuation of human resources in the books of accounts.

 Record is also maintained for the changes occurring in human resources over a period of time. It involves disclosure of the information in the financial statements of an organization for communication.

ADVANTAGES
Helps in planning and executing HR policies. Helps in calculating return on investment. Motivates employees. Indicator of the health of the enterprise. Improves decision-making process. Decision about further recruitment.

DISADVANTAGES
Non-availability of standard. Opposition of trade unions. Expenditure on HRA. Variety of methods.

HR AUDIT
An audit is an examination and verification of accounts and records. Audit is a systematic and comprehensive analysis of all activities and results of a personnel program.

DEFINITION
HR audit is concerned with the gathering, analyzing information, and then deciding what actions need to be taken to improve performance. - Storey and sisson

CHARACTERISTICS
An HR audit is an independent, objective and critical examination of the HR functions of an organization. It establishes a benchmark for measuring the actual performance of the HR department so as to identify the performance and efficiency gaps.

 An HR audit is done by internal employees or the external consultants with expertise in HR management and basic knowledge in law and auditing. The HR audit is normally carried-out at regular intervals in the organization. The HR audit report is normally sent to the senior management for necessary action.

BENEFITS
Fostering strategic business plans. Clarity of role of HR function. Organizational competency analysis. HR system analysis. Return on investment analysis. Increased focus on human resources and human competencies. Strengthening performance improvement mechanisms.

THANK YOU

ARTICLE ON HUMAN RESOURCE AUDIT

DEVARAJAN DASA

ASSOCIATE PROFESSOR, DEPARTMENT OF COMMERCE, PSG COLLEGE OF ARTS AND SCIENCE

ABSTRACT
A human resource audit aims at ascertaining the effectiveness of the HR department and its functions. The basic goal of an HR audit is to find out the HR interventions that will increase the firms competitive advantage.

LEVELS OF HR AUDIT
Top level organization Middle level organization Low level organization

HR AUDIT PROCESS

Determine the objective

Develop a rough audit plan

Gather data

Decide the data collection

Firm up the audit plan

Gather the complete data

Develop the audit report

Achievement based on the report

APPROACHES TO HR AUDIT
Internal Approach External Approach

ESSENTIAL OF HR AUDIT
Many organization now realize that their most important and expensive assets are their human resources. They recognize the need to exercise better control over these assets that they make an optimum return on the HR investment. In this regard, the HR audit is seen by the organizations as an invaluable tool.

AUDITORS INTEGRITY AND EFFICIENCY

The HR audit must be persons of high integrity, value and knowledge, especially in the case of internal auditors. Their recommendations must be highly objective and impartial in nature, otherwise they may not find acceptance among the employees.

EFFECTIVE COMMUNICATION
The management must ensure that there is an effective flow of the information at all levels of the organization. All information about rules, regulations, statutory provisions and policies concerning HR functions must be circulated widely among all the staff members connected with those activities.

REGULARITY AND CONTINUITY

The HR audit should not be viewed as a one time activity. It must be done on a regular basis with prior information to the employees. Only when it is done routinely would it force the employees to observe self discipline.

CASE STUDY ON SAIL

DR. ANKITA CHATURVEDI Sr.Assistant Professor,Department of Accounting and Taxation, The IIS University, Jaipur

OBJECTIVES OF THE STUDY

To examine the overall human resource management of the Company SAIL. To analyze the effects of human resource accounting on the organizational growth by applying technique of ratio analysis.

RESEARCH METHODOLOGY
To study the effects of human resource accounting the annual statements have been rearranged and presented in a suitable and appropriate form. The study covers a period of nine years, 2002-03 to 2010-11.

EVALUATION OF HUMAN RESOURCE

REVENUE FACTOR: 1.This is a basic measure of human capital effectiveness and it is the aggregate result of all the drivers of human resource management that influence employees' behavior. 2.This is calculated by taking the total revenue and dividing it by the total headcount of the organization.

Revenue factor 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 201003 04 05 06 07 08 09 10 11

Revenue factor

The revenue factor shows that despite of the decline in the number of employees i.e. from 137496 employees (2002-03) to 110794 employees (2010-11), the revenue per employee shows an increasing trend throughout the study period.This rising revenue factor is due to the fact that SAIL considers its human resources as its most valuable asset and has been continuously investing in this asset through systematic and well-planned programmes to make it current with latest technologies and processes.

 EXPENSE FACTOR 1.This is equally a basic measure of human capital effectiveness. It shows the operating expenses per each employee in the organization. 2.This expense factor is calculated by taking the total operating expenses and dividing it by the total head count of the firm.

Expenses factor 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 201003 04 05 06 07 08 09 10 11

Expenses factor

 The operating expense per employee shows a fluctuating trend throughout the study period. This was due to the increase in the 1.raw material cost 2.The changes in the stores and 3.Spare consumption expense, the repair and maintenance expense

 INCOME FACTOR 1.This measures the operating income of the organization for each employee. This operating income is usually the profit before tax of the company. 2.This factor is computed by taking the profit before tax and dividing it by the total head count of the organization.

Income Factor 0.1 0.08 0.06

0.04 0.02
Income Factor

0 -0.02
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

 The income factor also shows ups and downs during the period of study. The profit was affected adversely, mainly due to adverse impact of input prices consisting of imported coal, indigenous coal, limestone, nickel, ferro alloys, aluminium, boiler coal, purchase power, increase in royalty on minerals, salaries & wages, higher interest & depreciation.

 Production Factor 1.This measures the production per employee of the organization. 2.This is calculated by taking the total production and dividing it by the total headcount of the organization.

Production factor
0.6 0.5 0.4 0.3 0.2 0.1
Production factor

0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

The production per employee shows a rising trend throughout the period of study. SAIL's large skilled manpower base is a source of strength. With continuous emphasis on skill based and multi-skill training, company has been able to achieve the highest ever the production factor at 0.485 per employee during 2010-11.

CONCLUSION
It is concluded from the present study that, SAIL has recognized the potential of human resources in providing competitive advantage and considers its employees as most valuable resource. However, it was found that the regular superannuations, over the years, have resulted into skill depletion largely in the technical areas.

SUGGESTION
Therefore it is suggested to the company that beside technological up gradations and modernization, the company should also make efforts towards competency development. The company should also take continuous efforts for active participation by employees, for exhibiting creativity and innovation.

THANK YOU