Concept of Social Audit and its importance

SOCIAL AUDIT

“Social auditing is defined as a systematic attempt to identify, analyse, measure (if possible), evaluate, and monitor the effect of an organisation’s operations on society (that is, specific social groups) and on the public well-being.”

Social audit as a term was used as far back as the 1950s. In a nutshell, it refers to the steps that are taken to ensure that the work done by the government is actually benefiting the people whom it is intended to benefit. It is based on the principle that the local governance should be carried out, as much as possible, with the consent and in complete understanding of the requirements of the people concerned. It is a process and not an event. Thus, Social Audit is nothing but understanding, measuring, reporting, and most importantly improving the efficiency and effectiveness of the local governance. India being a welfare state, several programs and policies are implemented for the benefit of people. Politicians and executives are usually the ones who control and implement these policies. Some policies are common to all and some are special that are meant to benefit the weaker sections of the society. To implement all such policies, funds are drawn from the state exchequer. The social control over withdrawal and usage of this fund is called Social Audit.

Objectives of Social Audit Goyder defined the objectives of social audit in clear terms. He classified the objectives into two broad categories namely, 1. Principal objectives, and 2. Secondary objectives. Principal Objectives of Social Audit

 

The principal objectives according to Goyder are as follows. 1. The extension, development and improvement of the company’s business and building up of its financial independence. 2. The payment of a fair and regular dividend to the shareholders. 3. The payment of fair wages under the best possible conditions to the worker. 4. The reduction of prices to the consumers. Secondary Objectives of Social Audit 1. Provision of a bonus to the workers. 2. Assist in promoting the amenities of the locality. 3. Assist in developing the industry in which the firm is a member. 4. Promote education, research and development in the techniques of the industry. From these objectives, we can infer that social audit is really an extension of the principle of public disclosure to which corporations are subject. Need for Social Audit Each business enterprise is not only connected with internal public but intimately connected with external public also. The modem corporations are more powerful and command huge resources. This power should not be used indifferently, irresponsibly or in an antisocial way. Its activities can create much impact on the society. As such its impact over society cannot be ignored or taken lightly. Its behaviour not only affects the society but also creates problems to the Government. Thus, social audit has become the need of the day. Social accounting and Social Audit

 

Social accounting is a systematic assessment and reporting on those parts of a company’s activities, which have a social impact. It refers to the identification, measurement, recording and reporting the information as to social activities of the concern to its users (both internal and external). On the other hand, social audit refers to the systematic evaluation of an organization’s social performance. Here, its economic performance is not considered. It discloses the company’s involvement in socially oriented activities, activities taken for the well-being of the employers of the concern, activities as to prevention of environment from pollution etc.

PERFORMANCE AUDIT

Meaning

An independent examination of the efficiency and effectiveness of government undertakings, programs or organisations, with due regard to economy, and the aim of leading to improvements”.

Performance audit is simply an audit of sound financial management, namely of the economy, efficiency and effectiveness with which audited entities have carried out their responsibilities.

Performance Audit invariably is referred to as Value-for-money audit or Operational audit.

Performance Audits= Value for Money Audit = Operational Audits.

Objectives of Performance Auditing

 Acquire resources of the right quality, in the right quantity, at the right time and place at the lowest possible cost (Economy).

 Achieve the optimal relationship between output of services or other results and the resources used to produce them (Efficiency)

 Achieve policy objectives, operational goals and other intended effects (Effectiveness).

More specifically, in the public sector, benefits of performance audit may include the following:-

 Helps in the identification of problem areas, including factors that cause problems. This helps in finding alternative solutions, that is, through recommendations for improvements to policies, procedures and structure which could help in reducing wastage and inefficiencies.

 Helps in evaluating performance of individuals and departments or sections in an organisation. Evidently, performance audits assist in obtaining a critical view of compliance with legal requirements, policies, objectives and procedures.

 Helps citizens obtain insight into the management of different government programmes and activities. Performance audits may serve as a basis of decisions on future funding and priorities.

EFFICIENCY AUDIT

Efficiency audit is related to that whether corporate plans are effectively executed. In this, auditor investigates the reasons of variances in actual performance and planned-performance. It also investigates that capital resources of company are properly utilized. Purposes of Efficiency Audit Modern managements now-а-days undertake efficiency audit with а variety of objectives in mind. The principal objectives are: 1. То diagnoses the operational weaknesses by а review of the organization’s environment.

 

  1. То sees whether the resources of the business flow into constructive and profitable channels. 3. То assesses how far the measures and techniques adopted are effective in attaining the goals and objectives of the firm. 4. То highlights the important fact in each of the functions or operations that are employed. 5. То evaluates and compares the optimum return on capital invested in the business operations. б. То suggest and recommend feasible alternative treatments for improvements in а manner that the heads of the functional or operational management themselves would do if they have time for self — introspection (Examination of their own thoughts and feelings).
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