Description of the client
Tea Station Company was formed in 1996. The company is a franchise of the Ten Ren Tea Company. At the end of 2013, the company had 12 outlets that were located in Nevada and California. The company deals with the growth and promotion of exceptional tea and other related products. Specifically, the company offers a variety of Chinese tea products. The paper seeks to prepare an audit plan for the human resource department in the company.
Process flow diagram
The figure presented below shows the process flow diagram for human resource activities.
The human resource department carries out the function of recruitment, training, termination, salary and benefits administration, and record keeping. These activities are presented in the square boxes. The human resource function starts with the recruitment of potential employees. Once they are hired, they become employees of the company. Further, it can be observed that the company keeps records of prospective employees for future use. After they join the company, they go through training, which is organized by the department. Besides, the department prepares documents for the salary and benefits of the employees. Finally, the department prepares documentation and keeps records for the retired employees (Maund 17).
- To verify that the company has established adequate policies and procedures to mitigate the risks in human n resource functions.
- To ascertain compliance with the company’s human resource policy & procedure manual, labor laws, and good practice in the industry.
- To determine that the human resource function’s contribution towards the attainment of the company’s strategic goals.
The section will provide information on the risk assessment of the human resource department (Kumar and Virender 56). The areas that will be audited are human resource planning, recruitment, performance management , training, record keeping, leave management, and communication.
|Operation||Management assertions||Inherent risks||Controls in place to mitigate the risks||Risk rating|
|Human resource Planning||• To assess staffing needs for the future and make plans for recruitment and selection. |
• Ensure optimum use of human resources in the organization by eliminating a surplus or shortage of staff.
|• There can be overstaffing or understaffing in the organization. |
• Failure to monitor turnover rate.
• Human resource functions can be executed haphazardly in the absence of a plan (Bohlander 77).
|The human resource policy outlines that; |
1. The human resource department (HR) should develop an internal data bank and inventory, which lists the type, range and level of skills, knowledge and competencies available within the company.
2. Planning should include the following.
– Analyzing the current human resources.
– Making future staffing forecasts
– Developing employment and training programs.
– Developing an Organogram which is in line with the strategic goals (Armstrong 76).
|Recruitment||• Ensure that the company gets the right person into the right job at the right time.||1. Failure to plan for the manpower requirement for a given period. |
2. Failure to carry out job analysis and prepare job descriptions for positions to be filled.
3. Failure to do a thorough screening of candidates before being brought on board (Cole 34).
4. Inability to align the recruitment functions with the strategic goals.
|The human resource policy outlines the following; |
1. Line managers should ensure that job descriptions for all jobs are up-to-date. The HR department should facilitate the process.
2. All existing jobs in the organization must be described and job descriptions prepared. 3. Jobs should be reviewed periodically to ensure that unnecessary tasks or responsibilities are eliminated (Armstrong 106).
1. The HR department should source from a variety of areas. Examples are internal, recruitment agencies, advertisement, and sourcing directly from learning institutions.
2. The department should prepare a budget for recruitment before the year begins.
Screening and selection:
1. The HR department and other functional lines should conduct internal and external screening.
2. A range of screening techniques such as security checks, medical, qualifications, and references should be used when evaluating candidates during the selection (Armstrong 112).
3. There are minimum educational and experience levels for all jobs in the company.
4. The HR and other functional heads should participate in the recruitment process.
|Performance management||• Ensure that the department’s targets and the overall company’s objectives and goals are achieved (Rittenberg, Johnstone and Gramling 145).||• Failure to achieve overall company’s objectives. |
• Absence of an operational performance management framework.
• Failure to monitor employee performance from time to time.
|The human resource policy gives the following guidelines; |
• Line manager and a performer should agree on specific performance objectives that the performer is expected to achieve at the end of a specific plan period.
• The agreed objectives should be jointly signed by the line manager and performer who keep a copy each and the third copy should be forwarded to HR.
• Setting objectives is a cascading process that starts with the company’s objectives followed by the departments’ objectives (Armstrong 126).
• Line managers are supposed to regularly monitor the performer’s progress and proactively identify opportunities for re-enforcing positive achievements and/or behaviors, and for taking necessary actions to correct emerging performance gaps.
• Quarterly performance reviews should be conducted for all employees.
• Annual performance appraisal exercise should be completed by 31st January of every year.
• An overall performance aggregate should be determined. The appraisal document should be signed by both line manager and performer (Kumar and Virender 27).
• The results of performance improvement plan and recommended actions are recorded on the performance record tool. The tool should be signed by both the line manager and performer (Pine 56).
|Training||• Ensure that employees have essential work-related skills, techniques and knowledge that will improve efficiency and overall organization performance. |
• To motivate employees with an aim of reducing cases of dissatisfaction, absenteeism and turnover.
|• Lack of proper planning for trainings to be conducted during the year. |
• Unavailability of trainings organized for staff members and lack of budget allocation for the trainings.
• Lack of proper identification of training needs that are required by the staff members.
|Human resource policy outlines the following; |
• Training plans should be prepared before the beginning of the year.
• The line manager should separate the skills and knowledge that can be developed through on the job training and those that require formal education.
• The line manager should work with each employee to establish learning objectives and training plan to accomplish them, and monitor their progress.
• Proper plans, terms of reference and contracts should be prepared when the company decides to use training consultants.
• After training is completed, the department heads must help the employee to put the training into practice as soon as possible.
• Employees should submit a comprehensive report on the training to the line managers for perusal, appropriate circulation and retention in the personnel file (Armstrong 54).
|Records keeping||• To maintain accurate and up-to-date HR records.||• HR records may not be updated on time. |
• Prematurely destroying or retiring certain vital documents.
• Losing information needed for proper reporting
• Failing to properly safeguard and protect information and records from unauthorized insiders
|The human resource policy states that; |
• It is the responsibility of the HR department to develop an efficient, effective and user friendly HR information delivery system.
• Every year, the HR department should circulate to all staff a print out of their details as held in the database for their information and correction if necessary. All staff are required to return the print out with or without amendments.
• All changes in staff records must be supported by attaching approved documentation such as birth and marriage certificates.
• For all computerized systems and IT baselines controls such as access controls and disaster recovery plans must be followed.
• Physical personal files must be kept in fireproof cabinets.
• It is the policy of the company to retain HR records as per specified retention period.
|Leave Management||• To enhance the wellbeing of staff members, for risk management, and for development (Lussier 98).||• Lack of proper plans for leave days in the departments. |
• Inaccurate calculation of leave days for the staff members.
• Failure to keep proper records of leave days.
• Lack of a proper reporting system on leave management.
|The HR policy outlines the following with regard to leave. |
• Provide each staff member with an appropriate leave entitlement.
• Ensure that each staff member is away from his/her duties for an appropriate length of time.
• The amount of leave days carried forward should not be more than five days.
• Leave days carried forward should be taken in the subsequent year.
• Cash or other incentive that may encourage staff members not to take leave should be discouraged.
• It is the responsibility of line managers to plan for staff leave.
• Annual leave is earned from the anniversary of your employment.
• It is the responsibility of line managers to maintain leave records and to submit quarterly reports on leave absenteeism from work to the HR department.
|Communication||• Ensure that members of staff are well informed on all matters affecting them. |
• To enhance feedback and team work (Allen, Nerina, Prashant and Bernd 27).
|• Failure to carry out attitude surveys periodically. |
• Lack of evidence of proper communication channel.
|It is the responsibility of the HR manager to; |
• Issue staff handbook on HR policy
• Conduct attitude surveys
• Regularly analyze and respond to issues raised by employees through their line managers
• Promptly communicate changes that affect employees.
The section outlines the various audit procedures that will be followed when carrying out the human resource audit. It also provides the list of documents that will be reviewed under each area of audit (Burke 6). The information is presented in the table below.
|Operations||Documents to review||Compliance tests||Substantive tests|
|Human resource Planning||• Human resource plan for the current period.||• Ascertain if human resource planning process is consistent with the policy.||• Obtain the human resource plan for the current period and ascertain that it was approved by appropriate authority |
• Review the plan and ascertain that it was prepared using reliable data.
• Review actual results and compare it with the plan and determine if there are major variances.
• Find out if the HR plan supports the company’s strategic plan.
• Verify there is a plan for level of people to be recruited during the year.
|Recruitment||• Job descriptions |
• Checklist for documentation requirement.
• List of interviewers panel
• Human resource plan
|• Verify if all the job titles in the company have job descriptions and that they are reviewed on a periodic basis. |
• Ascertain if the policy is adequate and that it can lead to hiring of quality staff.
• Find out the criteria that are used for sourcing.
• Look at the proportion of staff on a permanent basis with those on contract basis.
• Ascertain if the contracts are renewed in time.
• Verify if staff members who have completed probation are confirmed in good time.
|a). Select a sample of a job description for the positions filled during the period and test for the following attributes: |
• Requisition is approved
• Job objectives are clearly stated
• Appropriate title is provided
• Special skills required to perform the job are identified
b). Select a sample of personnel files and test for adequate documentation with respect to the following areas:
• Transfers and promotions
• Performance evaluations
• Training/development activities
• Interviewing panel, verify if it complies with the policy.
• Verify if the records can give an audit trail.
|Performance Management||• Staff personal files||• Review a sample of staff files and verify that the performance management process was done in compliance with the policy. |
• Verify if the targets set are geared towards the achievement of strategic goals.
• Ascertain if training needs are identified from the appraisal.
|a). Pick a sample of staff files and; |
• Verify that there is a signed agreement between a line manager and performer on specific performance objectives.
• Check for documentation of quarterly performance reviews.
• Check for documentation of annual performance appraisal. It should be based on the objectives that were set at the beginning of the plan period.
• Verify that the overall performance aggregate is determined and the document is signed by both line manager and performer.
• Ascertain whether there are action plans for each employee.
|Training||• Training plan and budget for the current year |
• Staff files
• Contracts for trainings conducted during the year
• Evaluation reports for the trainings conducted.
|• From the trainings conducted during the year, verify that the procedures outlined in the HR policy are followed.||• From a sample of staff files, verify that training needs are identified during performance appraisal. |
• Find out if employees are encouraged to write a comprehensive report on the training they attend and that they submit such reports to the management.
|Records keeping||• Print out of staff members’ details circulated during the year.||• Determine if staff records are adequately protected from loss or damage. |
• Verify that access is restricted to authorized personnel and that backup of vital records is adequate.
|Pick a sample of staff files and; |
• Check if changes in staff records such as transfers, marital status, changes in qualification, promotions, and termination are documented.
• Check if the staff members were availed with a print out of their details and such are filled.
|Leave Management||• Leave roster schedules for all the departments. |
• Management reports
• Staff files
|• Check for compliance with the policy.||• Find out if there is a leave roster. |
• Find out if staff members are away from duty for a sufficient duration of time to facilitate job rotation and internal control.
• Verity if employees are away from duty while they are on leave as scheduled in the leave roster.
|Communication||• Reports of branch visit. |
• Reports on discussion forums held with staff.
• Reports of surveys.
• Complaint files/box and suggestion box
• Staff handbook on HR policy.
• Minutes of departmental meetings.
• Memos to staff members of changes affecting their daily operations.
|• Ascertain compliance with policy by checking for the existence of branch visit reports, reports of discussion forums held with staff members, and reports of attitude surveys.||1. Review methods used to collect feedback from both staff members and customers, assess the effectiveness of these methods. |
2. Pick a sample of staff members who have terminated their employment contract with the company;
• Find out if exit interviews were conducted
• Assess the action plan taken from the feedback obtained.
3. Verify the efficiency of communication across departments.
The internal audit department will conduct a review of human resource functions as scheduled in the annual work plan for the year 2014. The report will commence on Monday, 17th March 2014, and run for 2 weeks.
- To verify that the company has established adequate policies and procedures to mitigate the risks in human resource functions.
- To ascertain compliance with the company’s human resource policy & procedure manual and labor laws
- Determine the human resource function’s contribution to the attainment of the company’s strategic goals.
Scope and timing
The table listed below shows the areas that will be reviewed and the time allocated for each area.
|Area of audit||Time allocated|
|Entry meeting||27thMarch 2014|
|Human resource planning||1 day|
|Performance management||2 days|
|Leave management||2 days|
|Record keeping||1 day|
|Exit meeting||31stMarch 2014|
Documents to be reviewed
Some of the documents that will be reviewed are listed below. However, more materials will be required as the need arises.
- Human resource plan for the year 2013 and 2014
- List of staff members as of 1st January 2013, 31st December 2013 and 1st March 2014.
- Minutes of management Committees
- Management reports that are prepared by the human resource department
We agree with the planning document for the audit of the human resource department
Head of Human Resource Department
Head of Internal Audit
Allen, James, Jimmieson Nerina, Bordia Prashant, and Irmer Bernd. “Uncertainty During Organizational Change: Managing Perceptions Through Communication.” Journal of Change Management, 7.2 (2007): 187-210. Print.
Armstrong, Michael. Strategic HRM: A Guide to Action, London: Kogan Page, 2006. Print.
Bohlander, Gerald. Managing Human Resources, Mason, OH: Thomson Higher Education, 2007. Print.
Burke, Anne 2009, Introduction to Audit Planning. Web.
Cole, George. Personnel & HRM, London: Continuum, 2006. Print.
Kumar, Ravinder and Sharma Virender. Auditing: Principles and Practice, New Delhi: Prentice-Hall of India Private Limited, 2006. Print.
Lussier, Robert. Human Relations in Organizations, London: McGraw-Hill Publishers, 2009. Print.
Maund, Leon. Introduction to Human Resource Management: Theory and Practice, London: Palgrave Publisher, 2009. Print.
Pine, Brian 1998, Audit Planning. Web.
Rittenberg, Larry, Karla Johnstone and Audrey Gramling. Auditing: A Business Risk Approach, USA: Cengage Learning, 2012. Print.