CHAPTER 2

Approaches to HR Audit
 Introduction
• Approach is about classification & division of
audits
• Determine the order of audit performance & end
results
• Examples:-
- Internal or external
- Public or private orgn
- Financial or non financial
- Verification or review & etc.
 Approaches to HR Audit
• Auditors may adopt any of the five approaches
for the purpose of evaluation
(i) Comparative approach
(ii) Outside authority approach
(iii) Statistical approach
(iv) Compliance approach and
(v) Management by objectives (MBO)
(Osama Shaban, 2012)
 HR Audit Approaches
• Comparative approach - auditors identify another
company as the model. The results of own organization
are compared with the model company.
• Outside authority approach - use standards set by an
outside consultant as benchmark for comparison of own
results.
• Statistical approach – develop statistical measures of
performance based on the company existing
information eg. measure absenteeism and turnover
rates. The data help auditors to assess the performance.
 Cont…
• Compliance approach- auditors review past actions
to determine if those activities comply with legal
requirements and company policies and procedures.
• MBO approach - for specialists and operating
managers to set objectives in their areas of
responsibility. MBO approach creates specific goals
against which performance can be measured. Then
the audit team researches actual performance and
compares it with the objectives.
Approaches in Business/Private Sector
• 3 types (Olalla & Castillo, 2000).
1) Legal Audit Approach
2) Function Audit Approach
3) Strategic Audit Approach
 Legal Audit Approach
• Try to investigate whether the current labor
laws are fulfilled.
• Verify if the firm’s policies, practices,
documents regarding employee, hiring,
retention, discipline, termination & post
employment are both fair & legal
 Function Audit Approach
• Observing if the procedures applied are
adequate & if they function correctly
• Verify the ratio between completed aims &
expend resources
• Can use qualitative or quantitative method
• Ex. Of indicators – job analysis, HR planning,
Recruitment & selection…etc..
 Strategic Audit Approach
• Translate HR strategy into plans & programs
• Develop new set of strategic measurement
that connect directly with orgn mission
 Government Sector Approaches
• More concrete
• financial and performance audit
• also compliance audit.
• If compared with HR audit, compliance audit can be
linked with legal approach but performance audit could
be linked with function audit approach and strategic
audit approach
• usually performance audit types are connected with 3
E-s, which is economy (focusing on resources’ use),
efficiency (by comparing output to input) &
Effectiveness (emphasize on fullest achievement of
outcomes).