Abstract Human resource auditing crosses the boundaries between human resources management and auditing.

The main message from this study is that a human resource management performance audit can be a suitable method for evaluating the contribution of human resource activities to organizational evaluating the contribution of human resource activities to organisational objectives, assessed on the basis of value for money. The case study demonstrated that a human resource management performance audit can identify areas where additional value can be obtained from an already valued, well regarded and award winning human resource department. The human resource management performance auditing methodology is set down in the Australian auditing standards (Australian Auditing Standards 806 & 808) and assumes a professional practice framework for auditors. A human resource management performance audit is future orientated and can identify areas for organisational improvement. Where the literature on human resource auditing is not grounded in auditing, it Where the literature on human resource auditing is not grounded in auditing, it is flawed. Dolenko (1990) outlined a methodology for applying auditing techniques to human resource management but later literature is clouded by alternative commentary that defines human resource auditing in quite different ways (Clardy 2004). The literature on human resource auditing should be reviewed to ensure that it is firmly grounded in auditing. This research is aimed at bridging a gap in both knowledge and practice. The study presents as a worthwhile area for research since the researcher takes existing and authoritative standards for the professional practice of auditing and applies them to a modern, well regarded and valued human resource department. By clarifying the key elements of a human resources management performance audit and then demonstrating the audit in a case study this research makes a contribution to the theory and practice of human resource management performance auditing.

CHAPTER ONE - INTRODUCTION

1.1 Background Human resource auditing is located both within and between human resource management and auditing. This study focuses on the use of performance auditing to evaluate the contribution of human resource management activities, as defined in the audit scope, to an organization s current and future objectives. Human resource auditing is located both within and between human resource management and auditing. This study focuses on the use of performance auditing to evaluate the contribution of human resource management activities, as defined in the audit scope, to an organization s current and future objectives. The word audit comes from the Latin, audire (to listen). Auditing has existed for centuries and can be traced to ancient Egypt, Babylon and Rome. The auditor s role was to listen to the records and

the notion of an independent outsider looking in is central to auditing (Burrowes and Persson 2000). It is not the function of an auditor to take the role of management; the audit role is one of examination and of critiquing management systems and procedures (Clardy 2004). The literature on human resource auditing has been described as flawed with the term audit used indiscriminately so that almost any kind of study of human resources can be considered an audit (Clardy 2004). In this study the term human resource audit describes the professional practice of auditing applied to human resources management activities, while the term review is used to describe other forms of human resource evaluation. Through a review of the literature undertaken in Chapter Two and through a case study detailed in Chapter Four performance auditing is examined as a suitable method for evaluating the contribution of human resource management activities to current and future organisational objectives, assessed on the basis of value for money. The case study was conducted within the parameters of the Australian auditing standards to identify areas where additional value for money can be obtained from an already valued, well regarded and award winning human resource department. 1.2 Research issue The search for evidence of the decisive impact of human resources on organizational success has been described as the search for the Holy Grail (Boselie, Dietz & Boon 2005, p. 67). In this context the reassessment of an existing but unpopular method for evaluating human resource activity had the potential to make a worthwhile contribution to the body of knowledge. Discussion on the application of the national performance auditing standards to the evaluation of human resource management occurs in the Australian literature (Teo 1997) but practical examples are rare. In seeking to evaluate human resource management activities the issue to address was whether an examination grounded in performance auditing could usefully evaluate the contribution of human resource management activities to an organisation s current and future objectives . 1.3 Justification for the research There is a research gap surrounding the nexus between auditing and human resource management in relation to human resource auditing. This leads to confusion for human resource practitioners: in topic definition, in understanding the different types of audit, and in human resource practitioner knowledge of the professional practices of auditing. The lack of case studies in the Australian context ensures that human resource management performance auditing as an evaluation method is unnoticed by most human resource professionals. This research makes a contribution to both auditing and human resources management by examining the theoretical nature and the practical value of a human resource management performance audit.

Brief overview of the methodology The number of human resource performance auditors that can be identified in Australia is very small; a factor affecting the research design. Only two organizations advertise human resource auditing services in the professional directory of the Australian Human Resource Institute (AHRI 2007). No human resource management practitioners were identified that used an approach specifically grounded in the discipline of auditing. The performance audit methodology is set down in the Australian auditing standards and assumes a professional practice framework for auditors. The case study highlighted practical considerations and raised issues relevant to the conduct of a human resource management performance audit. The outcomes of the research were presented to various auditing practitioner forums, including the Asia-Pacific Conference of Internal Auditors (SOPAC) 2006. 1.5 Delimitations of the scope The research was limited to the Australian context using auditing standards for which there may not be an international equivalent. It was based on one in-depth case study, with the conclusions described in various practitioner forums. The lack of identified performance auditing specialists operating across human resource management activities made quantitative analysis difficult and effectively limited the research design. It is noted that the Australian auditing standards in relation to performance auditing are under review but they are not expected to significantly change in a way that would affect the validity of the research outcomes. The evaluation of alternatives to human resource auditing was beyond the scope of this study but is foreshadowed as a potential research extension. 1.6 Structure of the study The background to the study is discussed in Chapter One. A literature review is undertaken (Chapter Two) which provides an insight into the existing state of knowledge. Within the literature a methodology for evaluating performance grounded in auditing is identified, although it appears to be rarely used in practice. The research methodology is discussed in Chapter Three and the limitations of the research design identified. The case study is then described in detail (Chapter Four), including examples of working documents, with the audit outcomes detailed in a formal (and client directed, confidential) audit report The results of interviews with key stakeholders provide insights into human resource management performance auditing as an evaluation method. In Chapter Five the case study and the literature are jointly discussed and the implications analyzed. In the final Chapter (Six) the research findings and conclusions are detailed and areas for further research identified. 1.7 Summary This study considers performance auditing as a suitable method of evaluating the contribution of human resource management activities to current and future organisational objectives, assessed on the basis of value for money. The literature review identifies the existence of the methodology but published examples of human resource management performance audits are rare. The performance auditing methodology is then tested in a case study, with promising results. The approach suggested in this research is grounded in auditing and is also universal. According to the Australian Auditing Standard (AUS 806) it can be applied to all performance audits conducted: in the public or private

sector, by an internal or external auditor, and as a one-off project or as part of an ongoing engagement. Given the scope of the performance auditing standard the type of organisation, its size, and its location within Australia does not limit its potential use. Importantly, it is future orientated and can indicate areas for business improvement while also examining the risks associated with human resource management activities. By crossing discipline boundaries and mixing auditing methodology with the evaluation of human resource management this study highlights an evaluation method that deserves further research attention. The work of Khan (2005) would suggest a similar approach may be applied in the international arena.

2.1 Introduction This study focuses on the evaluation of human resource management activities using auditing methodology. Human resource auditing is located both within and between each of the fields of human resource management and auditing. This research has two parent disciplines: auditing and human resource management. Auditing is described as an investigative and information processing activity, which evolved in response to the need for independently verified stewardship reports (Parker, Ferris & Otley 1989). Within the discipline of auditing a human resource audit is a functional or activity audit conducted within or across a range of defined auditing types (see section 2.8). A human resource performance audit is one type of audit, generally located within the audit sub-type of operational auditing Human resource management emerged from traditional personnel management in the 1980s. Traditional personnel management was viewed largely as involving the performance of basic staffing functions, often conducted without regard to other organisational activities and without alignment to organisational objectives. Human resource management as a profession evolved as an extension of the traditional personnel role into a more effective organisational activity. Within the field of human resource management a human resource audit is one method of evaluating or assessing activities. This is not a clear sub-grouping; human resource evaluation is not systemically identified in modern textbooks. However, there is evidence in the literature of the grouping of human resource auditing with other human resource evaluation methods for the purposes of discussion and comparison.

PURPOSE-HR AUDIT  The purpose of the audit is to reveal the strengths and weaknesses in the human resources system, and any issues needing resolution.  The audit works best when the focus is on analyzing and improving the HR function in the organization. The audit itself is a diagnostic tool, not a prescriptive instrument. It will help you identify what you are missing or need to improve, but it cant tell you what you need to do to address these issues.  It is most useful when an organization is ready to act on the findings, and to evolve its HR function to a level where its full potential to support the organizations mission and objectives can be realized.

How should it be conducted? The audit process consists of a series of questions covering the eight primary components of the HR function: 1. Roles, head count, and HR information systems (HRIS) 2. Recruitment 3. Documentation 4. Training, development, and career management 5. Compensation and benefits 6. Performance measurement and evaluation 7. Termination and transition 8. Legal issues and personnel policies 9. Health / Welfare systems 10.Employee Relations 11. Safety 12. Resourcing
The HRMA (Human Resource Management Audit) uses this framework to try to answer such questions as these 1. Are the mission and strategy of the human resource organization designed to match the business strategy of the organization? 2. Does the design of the human resource organization enhance its ability to accomplish its strategy? 3. Are the kinds of people who run the human resource function good choices for the ongoing tasks? Abstract The aim of the project is to assess company policies and practices, identify areas of noncompliance or weakness, uncover issues, and determine how to strategically align HR practices with business objectives. The Employment Practices/Human Resources Audit (EP/HR Audit) was developed so that it may ascertain current employment practices and procedures and to determine whether or not your opinion is equally shared by other companies. The audit is a tool that used to measure an employer's compliance with its legal obligations in managing its workforce and Chart any corrective actions that might be needed. Fortunately, it is relatively easy to perform an audit, although it does require time and effort.

The Purpose of the project is to ensure legal compliance with employment laws and reduce the company's potential exposure to claims and litigation. Identify inconsistent procedures and practices before they become problems. Strengthen credibility and trust of top management .Improve or enhance employee communications and employee morale

HR vulnerability reviews, like financial audits, are worth the time and effort it takes because they help your company be more effective, reduce the threats of legal challenges and complaints, make any charges more defendable, and help the company achieve its goals. Certainly the cost is far less than the legal costs involved in defending a complaint or for that matter losing one.

REVIEW OF LITERATURE

Managers need to know about the general health of the organizations they lead. They require continuous feedback to appraise the performance of the various units and individuals and to take corrective action, if required. The need for measuring and evaluating the effectiveness of the personnel programmes and policies is widely felt by the modern organizations. Personnel or human resource audit and research brings out how the personnel programmes are functioning and to locate practices and policies which are harmful to the organization. It enables the management to detect any serious discrepancies or inadequacies in the company s personnel programme before they cause any greater trouble. Timely correction will not only improve morale of the employees but also increase labour management cooperation. Human resource audit is important parts of the human resource management process. All the personnel policies, practices and programmes must be appraised critically in order to know their effectiveness. Personnel audit may be done by the persons working in the personnel department or even by the outside specialists

"Audit" is a word that usually sends shivers down your spine. What typically comes to mind is the periodic financial audit in which the company's books and records are reviewed to identify potential issues. Audit is one of the important management control devices. Personnel audit is used widely to check the organization s performance in its management of human resources. It reveals how the management is doing in getting things done through and with other people. To facilitate control, personnel audit reveals important facts as absenteeism, labour turnover, grievances field and other similar indices. The primary objective of the personnel audit is the critical review and evaluations of the manpower management progarmme in the organization. In conducting an audit, the auditor examines the degree of conformance with accepted business policies and practices and the legal provisions. He also examines the accuracy with which records and accounts are maintained. Thus audit serves as a control mechanism over the completed actions. The goal of audits should be to protect the company, establish best practices and create an opportunity for improvement. According to Dale Yoder, personnel audit refers to an examination and evaluation of policies, procedures and practices to determine the effectiveness of personnel management . Personnel or human resource audit is an investigative, analytical and comparative process. It undertakes a systematic search of the effectiveness of the personnel programmes. It investigates formally and in depth as contrasted with day to-day informal impressions. Personnel audit should not be confused with the measurement of employee moral. Personnel audit reveals the extent to which management has been successful in encouraging the personnel identification of employees with the organization and their acceptance of the organization goals. It checks the indicators of the quality of leadership, of motivation, of communication, effectiveness of supervision and constant development of operative employees, supervisors and managers

The Employment Practices/Human Resources Audit (EP/HR Audit) was developed so that may ascertain current employment practices and procedures and to determine whether or not your opinion is equally shared by other companies. It is felt that by reviewing the basic elements of Human Resource duties and responsibilities and managements position on various items it is reasonable to determine a relationship to the at-risk level the company faces.

What is a Human Resources audit?

. The audit is a tool that used to

(i) (ii)

measure an employer's compliance with its legal obligations in managing its workforce and Chart any corrective actions that might be needed. Fortunately, it is relatively easy to perform an audit, although it does require time and effort. We will discuss that a little later.

Conducting HR audits is an integral part of an HR professional's role in any company. Not only will an HR audit help a company ensure it is in compliance with the law, but it will help HR professionals standardize processes, identify risk areas, and tie HR to strategic business goals. There are various types of audits designed to accomplish a variety of objectives. An HR audit can be as comprehensive as needed within the constraints of time, budgeting, and resources. There are also various steps an HR professional can take during the audit process to make the process run smoothly, effectively, and efficiently.