The Internal Audit Standards Board of the Institute of Chartered Accountants of India has released a technical guide on social audit. The social audit, being issued with the motive to promote accountability as well as make the organization’s activity more transparent to help external stakeholders. Let us get into detail to know what exactly the concept of “Social Audit” is.
What is a Social Audit?
A social Audit is a special type of audit that is conducted in order to measure, understand, report and also improve an organization’s social and ethical performance. Also, to clear the difference between vision and goal, to narrow the difference between efficiency and effectiveness, the social audit has come as a rescuer in the legal world.
It is an audit that redefines the meaning of viability from the narrow financial profit and loss account to a broader set of values and examines the procedure and performance of an organization’s social and commercial actions in relation to its stated objectives and its external and internal position.
The new concept of social audit is a concept that requires credible information written in the legal papers to work and operate effectively. The professional Chartered Accountants (CA) are the ones having the credible knowledge about the concept of auditing. With the help of Chartered Accountants, the concept of “Social Audit” will become more known to people and will also expand their knowledge base on this emerging area. Therefore, Chartered Accountants have a major role to play in the audit process of Social Audit by providing assurance to this mechanism through the assurance process.
All in all, to understand in simple words “ It is an independent evaluation conducted to measure the performance of an organization as it relates to attaining the social goals. Social Auditing is to said as an in-depth scrutiny and analysis of the working of any public utility in relation to its social relevance.
Characteristics and Principles of Social Auditing
The characteristics as well as principles of social auditing are as follows:-
- Audit of the non-financial impact of the activities/ policies of an organization;
- Audit in respect of the achievement of social objectives;
- Audit carried out from the point of view of various social stakeholders (not merely owners) who can influence or are affected by the activities of the organization; and Allows comparability of organizations over time and between stakeholder groups.
As per the experience of the past practices conducted to define common themes of social audit, here are the following characteristics identified.
- Improved Social Performance
- Multiple Stakeholder Perspective
- Comparability
- Comprehensiveness
- Regularity of Coverage
- Independent Verification
- Transparent reporting
Qualities of a Social Auditor
There is no prequalification or standard identified by the law in order to act as Social Auditor. However, some of the basic auditing principles that can be followed to become a Social Auditor are as follows:-
- Independent and Fair
- Ability to assess and avoid subjective judgement
- Discovering the originality
- Ability to understand programs in wider context
- Expert in Social Auditing
These were the characteristic required by an individual to become a Social Auditor and conduct a social audit of an organization. Keeping that aside, the independent agencies, accounting firms, or other types of organizations (including accredited agencies that fulfill certain qualification criteria) that demonstrate the above characteristics.) are also capable for conducting a social audit.
Components of Social Audit
There are basically two components covered under the concept of Social Audit. Both the components vary differently upon different levels. Let us know about both the components and the levels covered therein.
- At the Organizational Level, Social Auditing system has two components namely, Internal and External:
- The Internal component deals with the creation and maintenance of an independent information system that is able to generate, capture and record data for measuring the social impact of the organization (of the nature of Social Accounting).
- The External component relates to the independent assessment by an independent Social Auditor of the information system and the information generated therefrom.
- At the Community or the Civil Society Level, a Social Audit can be carried out by gathered independent data from stakeholders on community values, social benefits, social capital and quality of department/ programme interface with people. This is matched with outcomes of Social Audit carried out at the organization/department level. Based on the analysis, the programme or its activities are oriented towards community/ society’s expectations.
The Audit at the Civil Society level tends to be intensive and as such there is a need to have trained hands at that level.
Need for Social Audit
There are various factors that lead to the emergence of the need for Social Audit in the recent times.
- As per the press media, negative impact was being caused on the corporate bodies and other institutions of the community and people.
- Increased awareness of consumers and consumer organizations on the impact of their consumption pattern on the corresponding actions of businesses and governments.
- Broadening of the concept of “stakeholders of organizations” with the understanding that an organization affects far more people than that was earlier envisaged.
Objective of Social Auditing
The objective of Social Auditing are categorized into various points mentioned below:-
- Assessing the physical and financial gaps between needs and resources available to meet targeted social objectives.
- Creating awareness among beneficiaries and providers of social and productive services.
- Increasing efficacy and effectiveness of development programmes.
- Scrutiny of various policy decisions, keeping in view stakeholders’ interests and priorities, particularly of marginal sections of the society.
- Estimation of the opportunity cost for stakeholders of not getting timely access to public services.
Benefits of Social Audit
The benefits of conducting social audit are mentioned below, namely:-
- Enhanced Credibility
A social Audit is a type of audit that helps in enhancing the credibility of an organization with its stakeholders by upgrading the brand image that would result in higher equity with stakeholders.
- Helps in Policy decisions
Based on the Social Audit findings, the policymakers of the organization could re-strategize for course corrections to ensure that its social impact is as intended.
- Positive support from stakeholders
Organizations that emerge with a positive Social Impact through their objectives and actions tend to have a higher sustainability as they enjoy the support of the social environment in which they operate.
- Increased Social focus
Organizations can better manage it’s risks, as it can enhance its social focus by covering any adverse social impacts highlighted by it in a social audit report.
