Social Audit: Features, Types, and Limitations (+ Detailed Guide)

social-audit
social-audit

A social audit is an evaluation of a company’s production procedures, policies, and code of conduct, to find out more ways they can impact society. Social auditing is extremely important because it provides information on how well a corporation is keeping the balance between making profits and social responsibility. During this process, if anything is found negative, necessary actions are taken to resolve them. Find out more about social audits as you go through this article.

What is a Social Audit?

In business, a social audit is defined as a proper evaluation (or audit) of a company’s procedures and endeavors with regard to corporate social responsibility (CSR) and societal impact. It is an assessment of how well the corporation is achieving its goals or benchmarks for social responsibility. Ideally, companies aim to strike a balance between profitability and social responsibility.

A social audit is an enclosed examination of how a selected business has effects on society. The audit helps companies to work out if they’re meeting their objectives, which can include measurable goals and benchmarks. A social audit is a way for a business to work out if the actions being taken are being positively or negatively received and relates that information to the company’s overall public image.

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Reasons for a Social Audit

In the era of corporate social responsibility, corporations are often expected to deliver value to consumers and shareholders, as well as meet environmental and social standards. Social audits can help companies create, improve, and maintain a positive brand image. For several companies, an honest public perception helps foster a positive image of the company and ultimately reduces negative impacts on earnings from bad press.

Social audits exert a robust influence on impacting the general public relations image of companies and are usually heavily focused on, especially for larger publicly-traded corporations hoping to keep up an honest public perception since it ties in with their earnings and share pricing.

Another reason for conducting a social audit is to ascertain a positive image of the corporate in society to draw in more customers. Companies conduct social audits internally, and if everything is found fine and per the society, then the report is formed public. This not only puts a positive impression on the purchasers of the corporate but also will attract investors.

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Objectives of a Social Audit

The following objectives of social audit are as follows:

  • It is done to assess the physical and financial gaps between needs and resources available for local development.
  • It is used to create awareness among beneficiaries and providers of local social and productive services.
  • Estimation of the chance cost for stakeholders of not getting timely access to public services.
  • It increases the efficacy and effectiveness of local development programs.
  • It scrutinizes assorted policy decisions, keeping seeable stakeholder interests and priorities, particularly of rural poor.
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Purpose of Social Audit

The purpose of conducting a Social Audit isn’t to search out faults with the individual functionaries but to assess the performance in terms of social, environmental, and community goals of the organization.

It is the simplest way of measuring the extent to which an organization lives up to the shared values and objectives to it’s committed itself.

It provides an assessment of the impact of an organization’s non-financial objectives through systematic and regular monitoring, supported by the views of its stakeholders.

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Features of a Social Audit

  • Multi-Perspective: This aims to reflect the views (voices) of all those people (stakeholders) committed or full of the organization/department/program.
  • Comprehensive: This aims to give a report on all aspects of the organization’s work and performance.
  • Participatory: This encourages the participation of stakeholders and sharing of their values.
  • Multi-Directional: Here, stakeholders share and provide feedback on multiple aspects.
  • Regular: This aims to supply social accounts on a daily basis in order that the concept and practice become embedded within the culture of the organization covering all the activities.
  • Comparative: This provides a way, whereby, the organization can compare its own performance annually and against appropriate external norms or benchmarks and supply for comparisons with organizations doing similar work and reporting in a similar fashion.
  • Verification: This ensures that the social accounts are audited by a suitably experienced person or agency with no vested interest within the organization.
  • Disclosure: This ensures that the audited accounts are disclosed to stakeholders and therefore the wider community in the interests of accountability and transparency.
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How to Conduct a Social Audit?

Social audits take a glance at many various factors within a corporation to live, report, and ultimately improve an organization’s social performance.

They’re a strong tool for social accountability, with the scrutiny of the actions of officials and management sometimes resulting in the invention of administrative and financial irregularities and corruption.

Some of the things that social audits examine are included below:

  • Records of charitable contributions
  • Volunteer events
  • Transparency within the organization
  • Work environment
  • Salaries and wages of the workforce
  • Community initiatives
  • Diversity within the workplace
  • Accounting and financial transparency
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Ways to Conduct a Social Media Audit

Find below the well-defined steps involved in a social audit:

#1. Define The Scope

Social auditing consists of the auditing of assorted departments and activities at identical times. Therefore, it’s important for the auditor to ascertain the boundaries which means he should decide what should be audited and what shouldn’t be audited during the auditing process.

The objective of conducting a social audit is to research the method implemented for the execution of the method, the quality of basic services and infrastructure created, and to assess the health and security measure taken.

#2. Choose The People Participating in the Process

In the next step, you may decide who should be included in the process. Whether or not they are the management of the organization or stakeholders. And also define up to what percent an individual would be involved within the process, how often they’d be contacted, and what information would be shared with whom?

They can also work because the consultation within the social audit process, ensures that the folks involved in the process are unbiased and don’t have any personal objectives. The full purpose of conducting the social audit process is to harmonize with society and the environment.

#3. Define The Key Issues

Define the key issues that are required to be cross-checked within the process and a knowledge collection procedure for those issues:

In the next step, key issues which are required to be analyzed and tackled through the social audit process should be defined. Define what information should be collected for the actual issue and what methods should be chosen to gather information. Different records should be analyzed at different points in your time to arrange a report.

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#4. Generate A Report for Findings And Verify It

In the next step, you must generate a report about the findings of social auditing. Social auditing reports can or may not be published. Therefore, it’s important to review the report and physically verify the method of important tasks. Make sure to verify the processes by visiting the workplace; otherwise, a low mistake within the social auditing report might leave the accuracy of the full report in jeopardy.

#5. Present The Report

The main purpose of conducting a social audit is to present a report about the work process of a company. The report is presented to designated management or shareholders, and sometimes reports are presented publicly. However, an organization holds the proper whether to share reports publicly or not. Finally, the specified steps are taken to deal with the problems.

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Limitations of A Social Audit

The following are some of the limitations affiliated with conducting a social audit:

  • Time and organizational effort are required to set up social accounting systems.
  • Cost of doors resources like interviewers and social auditors.
  • Unless embedded in organizational culture, there’s a danger of it becoming a one-off paper exercise.
  • Achieving recognition by stakeholders et al. of the worth of Social Audit.
  • Identification of, and obtaining views and opinions of non-stakeholders who could also be potential stakeholders.
  • Exclusion of potential participants if the method is formed is complicated and confusing through the involvement of execs.
  • The lack of standards for the Social Audit process and recognized qualifications for social auditors may damage the credibility of the method.
  • Perception of organization manipulating or hijacking stakeholder views.
  • It may be highly complicated, and time taking for the users.
  • It doesn’t offer any variety of transparent methodology.
  • The defined scope might get difficult for the users.
  • It tends to be subjective is one more reason why the identical is extremely discouraged.
  • It lacks qualified trainers.
  • The practical utility of social audit is minimal.
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What is An Example of A Social Audit?

A laptop maker recently decided to shut down a factory there without taking into account the repercussions on the neighborhood. Many people showed up to voice their worries about how the firm has harmed them once knowledge of the company’s actions spread. An investigation led to the discovery of additional information. The company is charged with filing fake tax returns in addition to illegally firing the employees. A social audit was launched when these facts became known, providing those who have been affected a chance to voice their worries. A solution that involves paying back taxes and helping those who lost their industrial employment with retraining was developed to address the shortcomings found throughout this process.

Resources and Assistance For Auditing

Social auditing most frequently takes the form of human rights impact evaluations. This tool is designed to track the consequences a project will have on its users, specifically how those users’ rights will be affected. The evaluation can also be utilized for community relations by giving decision-makers a sense of how locals feel about development projects. Locals can express their worries before a project even begins. The likelihood that these initiatives will benefit all parties involved will rise as a result. Who performs a social audit?

Who Performs A Social Audit?

Social audits can be carried out by a wide range of persons and groups, including non-governmental organizations, local communities, unbiased auditors, and governmental entities. Organizations regularly carry out social audits to ensure they are ethically upright and to better understand how their actions affect the community.

For initiatives with a $5 million or higher annual budget, Microsoft, for example, has said that it will conduct a social audit. By doing this, Microsoft can monitor the project’s development and identify problems as they arise without interfering with its ongoing work.

Are Social Audits A Part of Statutory Audits?

This category includes audits, as the word “Social” suggests. As a result, an audit is not required. “A study of financial records or accounts to check for correctness and completeness of information, in order to establish an opinion on whether they are free from substantial misstatements” is how the term “statutory audit” is defined.

This justification makes it clear that statutory audits must rely on the Comptroller’s financial records of assets, revenue, and liabilities. These (and other) issues may be the focus of social audits, but they are not the only ones. Decision-makers can fulfill their commitments to stakeholders thanks to the information supplied by social audits, which also contributes to the more effective, efficient, and moral administration of projects.

What is A Social Audit in Accountancy?

Accounting involves gathering, analyzing, and sharing financial data about companies and other economic entities. Records and papers have been offered as proof. An organization that practices social responsibility will carry out a social audit to evaluate how its actions impact stakeholders, the community, and the environment. Financial reporting will be used to gather pertinent data on the social impact of the company. A financial statement is a reliable source of information since it displays the outcomes of an organization’s operations and offers details on its general performance and potential. Due to this, an annual report should also include information about any ethical considerations that have been made in addition to financial data.

What Details Are Included in A Social Audit?

Depending on the social audit, a variety of information types might be included. Information could include feedback on issues with projects or procedures from community members as well as complaints made about a project or activity. Investigators may also be interested in any pertinent information relating to contracts, employment, or building permits. Aspects of accounting and financial transparency, community development and financial contributions, as well as candor in revealing any issues relating to the impact on the general public or the environment, may also be included.

What Problems Could A Social Audit Find?

Projects and processes can cause problems for people in a variety of circumstances. Human rights abuses and prejudice against different cultures, languages, or faiths may be among these problems. There may also be worries about how the project or practice may affect environmental safety, health, and pollution. Social audits frequently identify these problems before they escalate to the point where they endanger a community or the environment.

There Are Six Different Types of Social Audits.

The many forms of social audit are numerous. The ones that are most typical include:

#1. Economic Audit

These audits look at how money is made and spent, where resources are allocated, and the advantages and disadvantages of a certain project or technique. They also examine the impact of externalities on issues like housing needs for those who reside in disadvantaged areas, infrastructure for healthcare delivery, and community development.

#2. Environmental Audit 

similar to economic audits but taking the environment into account. On occasion, serious air, water, or soil pollution can have an impact on people’s health. The influence of this project on these factors would be taken into account when assessing its social responsibility.

#3. Social Risk Audit

In this situation, social audits evaluate the potential of a range of unfavorable outcomes, including unrest and violence, legal issues, and criminal activity. Additionally, they concentrate on particular effects on groups including migrants, women, children, and indigenous peoples.

#4. Community Audit

These audits concentrate on neighborhood-based initiatives that connect communities to services or employment opportunities. They typically work together to strengthen these groups’ capacities so that they can have a greater impact on services or employment options.

#5. Human Rights Audit

Non-governmental organizations, teams, and other external parties frequently conduct these audits to determine whether human rights have been violated in a certain area. The utilization of child labor, the right to free association and assembly, the eradication of racism, and the rights of indigenous people are all topics that are frequently discussed.

#6. Contract Audit

These audits look at how policies or procedures impact those who work for a company under contract, including their ability to organize themselves effectively, receive good treatment, and be paid fairly. They also consider how easy it is for people to get services like medical care in the event of an industrial injury.

Who is The Father of Social Audit?

Kreps Academician Theodore J. is recognized as the idea’s originator in the 1940s and the social audit concept. Kerps urged businesses to recognize their obligation to treat residents with respect. In 1953, Howard R. Bowen introduced the concept of “Social Audit” in his article titled “Social Responsibilities of a Businessman.”

What Are The Principles of Social Audit?

SA promotes common ideals and the involvement of stakeholders. The stakeholders provide feedback on a variety of subjects. The working organization can compare its performance to the goals they have set using SA as a comparative tool.

What is Social Audit in NGO?

A new idea that has gained popularity and relevance in the context of good governance is social audit. Civil society can identify the discrepancy between the intended and actual effects of a project, program, or service by using social audit’s methodical procedure.

Summary

This article explains what a social audit is, its limitations, objectives, and several other factors. If you have any questions or suggestions, kindly let me know in the comments section.

All the best!

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