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Human Resource (HR) department Audit checklist


CA Pulkit Sharma

2014-07-24

Human Resource is one of the main departments that require highest care. Here is a checklist of things to be checked while performing a HR audit.

Does Company have an active HR Policy?

Every company must have a HR policy. Each and every decision or actions should be taken as per policy. Auditor should verify and report if HR department does not follow the policy completely.

Recruitment Policy

Auditor should report whether company has a recruitment policy. The policy should be in writing and distributed to concerned officers. Interviews and selection criteria should be specified in policy. Policy should specify the list of documents that candidates should produce before induction.

Policy should specify selection procedure for each level of organization. Auditor should verify that company has recruited employees as per policy and documents are collected as required by policy.

Statutory Forms and Returns

Auditor should verify whether company is filing the statutory forms such as PF, PT, and TDS on time. Auditor should report any delay in filing the returns.

Auditor should also report whether company is complying with provisions of PF act.

HR Budget, Employee Database

Every company in advance makes budget for each department. Auditor should report the variance, and also verify the reason for variance.

Auditor should report whether data of each employee is kept in secured place and is not accessible by unauthorized persons.

Auditor should also verify that each employee has a separate file and his records are kept safely and files are marked and can be identified with an index assigned.

Payroll processing, Employee Advance and other receivables

Auditor should verify whether company has proper process to allow loans or advances to employees and proper accounting is done. Auditor should verify whether company is deducting dues from salary, wherever applicable.

Auditor should verify whether payroll is timely processed and complains related to payroll processing are not often.

Leave Policy, Employees Attendance and Welfares

Auditor should verify that all employees follow the attendance rules. Auditors should check whether employees are signing the attendance register or not. He should also check whether salary is paid as per leave policy.

Auditor should verify leave policy and examine the selected sample whether salaries are paid as per leave policy. Auditor should check whether employees are availing leaves as per policy and leaves are carried forward or paid as per policy.

Auditor should also check whether HR department has a policy for staff welfare. Auditor should report if HR department does not conduct the welfare activities or budget allocated for welfare schemes is not utilized.

Exit Policy, and Closing of Employee Database

Auditor should verify whether all formalities as required by Exit policy of company are completed before employee Leaves Company. Auditor should report whether exit interviews were conducted or not.

Auditor should report whether Mail access of employee is blocked or not after employee leaves. Hr department should take control of all assets including access cards, mail access, ERP access from employee and all id’s associated with exiting employee should be blocked.

Auditor should verify the Full and Final settlement of employees and report if full and final settlement has any inaccuracy.

Rahul Rai

2014-07-24

A very good article. This will help not only auditors but also HR professional to improve their policies.

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CA Pulkit Sharma

2014-07-24

Thank you for the appreciation.

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