Table of Contents
What is a Social Audit?
Explanation of Social Audit
Social audit includes any activity which has a significant social impact, such as activities affecting environmental quality, equal employment opportunity, consumerism, community needs, labor relations, shareholder relations, economic activities, and fixing responsibility within the firm for social performance.
Features of Social Audit
Social audits are so nebulous that they are difficult to measure, and generally accepted social norms are almost not-existent.
Technical flaw in Audit
“If there is single technical flaw in the audits that have been attempted, it is the relative absence of norms whereby to judge performance. Granted, many norms are hard to come by: What, for example, would be a good norm against which to judge a company’s performance with minority suppliers or community relations? Circumstances vary so much from company to company that it may be a long time before we can come up with any criteria for judgement beyond honest efforts.”
Social results are difficult to audit
Social results are difficult to audit because most of them occur outside an organization and so a firm has no way to secure data from these outside sources. Even when data are available, cases are so complex that a firm has no way to know how much of the results its actions have caused. However, though results cannot be proved, an audit of what is being done can be considered desirable because it shows how much effort has been made by the business in areas deemed beneficial to community.
Social audit can be made by internal auditors
Social audit can be made by internal auditors, outside consultants or a combination of the two. If an internal auditor is appointed, he is familiar with the business but this judgement may be biased because of his loyalty to the company. An external auditor has an independent view, but he lacks familiarity with organizational activities and he may, therefore, overlook significant data. But the report produced by him more credibility among the public. Hence, social audit should be made by an external auditor for internal use only and that it should be made only every five years.
Social audits use both quantitative and qualitative data. Quantitative data are generally preferred because they are precise and convincing but in the field of social philosophy and human values, they prove misleading, for they represent only a part of the total picture. The firms, therefore, normally use as much quantitative data as possible, whichever is found suitable for communication, and this is then supplemented by qualitative data.
Approaches to Social Audit:
Dilley and Weygandt have suggested four general approaches towards social audit:
- The inventory approach, under which a list of all the company’s social activities is prepared.
- The cost or outlay approach in which the amount spent on each activity is disclosed.
- The programme management approach, in which in addition to the above approaches, a statement is made as to whether or not the company met its objectives for each activity.
- The cost-benefit approach, under which the benefits of each expenditure, i.e., the real worth, is indicated.
The least informative of these approaches is the inventory approach, but the current practice adopted by most firms is to use this approach. The most informative approach is the cost-benefit approach, but the benefits achieved cannot be measured accurately. Some companies also use the two other approaches. But, a good approach would be to attempt a social audit report based on cost or outlay approach.
The results of social audit may be measured by looking into the following issues:
- Social audit looks for the overall approach of the company in its day-to-day conduct of business? Has it been merely actuated by the motive of maximizing its profit or it has also kept in view the aspect of service to society?
- Social audit looks for the company’s role in harnessing the natural resources at its command with due care to ensure that the interest of both present and future generations are safeguarded. For example, a coal mine can be worked in a manner that the owners or the lease-holders derive the maximum profits in a short span but in the process make the mine unworkable for future.
- Whether the organization is helping in advancing efficiency and productivity in society in general?
- Whether the company is planning its affairs in such a manner that it is able to provide dignity of labor, eradicate unemployment and employ persons according to their abilities and aptitudes.
- Social audit takes due care and sees whether the organization, in the matter of recruitment, promotion and diversification, is following a policy of discrimination on grounds of race, religion, political views, social status, sex etc. Has it been able to, by its policies, counteract such discrimination by others?
- Are the company’s policies encouraging talents in the field of its activity or in ancillary and related fields of work?
- Social gives importance to working conditions and sees whether they are safe, healthy, and conducive to the development of health and personality of its employees?
- Whether the organization is motivated by a desire for the well-being of its employees? Has it been taking steps by way of providing insurance, old-age pensions and other retirement and consequential benefits’?
- Whether the undertaking is developing an urge amongst its employees to do research and development work and encourage them for new inventions and devices?
- Whether the organization is respecting the rights of labor to organize and have collective bargaining?
- What is the policy of the corporation in the matter of prices, wages and profits and is it progressive in its approach?
- Whether the corporation is honest in its dealings with persons who come in contact with it and does not resort to such practices as adulteration, cheating and producing substandard goods?
- Social audit also looks for whether the company is taking due care to avoid pollution?
- Whether it is taking due care of consumers and does not indulge in various monopolistic restrictive and unfair trade practices?
- Whether it is catering to consumers’ satisfaction and is paying due attention to consumers’ grievances?
- Whether it is taking due care and precaution in the marketing of goods which are hazardous to health or life.
- Whether it is taking precaution not to indulge in fraudulent, deceitful and grossly misleading information in advertising and in other trade activities.
- Social audit checks whether the public finances obtained from banks and other financial institutions are being properly utilized.
- That the auditors should warn the government and the shareholders about the true state of affairs of companies.
- That the auditors should raise warning signals of any impending sickness in the industry.