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Suppose you are working in a bank.  What kind of social audit process should the bank perform and why?

Suppose you are working in a bank.  What kind of social audit process should the bank perform and why?
A social audit is a way of measuring, understanding, reporting and ultimately improving an organization's social and ethical performance. A social audit helps to narrow gaps between vision/goal and reality, between efficiency and effectiveness. It is a technique to understand, measure, verify, report on and to improve the social performance of the organization.

Social auditing creates an impact upon governance. It values the voice of stakeholders, including marginalized/poor groups whose voices are rarely heard. Social auditing is taken up for the purpose of enhancing local governance, particularly for strengthening accountability and transparency in local bodies.

Advantages of social audit
(a) Trains the community on participatory local planning.
(b) Encourages local democracy.
(c) Encourages community participation.
(d) Benefits disadvantaged groups.
(e) Promotes collective decision making and sharing responsibilities.
(f) Develops human resources and social capital

Understand Operating Environment
•   An auditor evaluates the leadership abilities, ethical qualities and business practices of a corporation's senior management team to understand operating conditions and factors that affect the organization's social activities. An auditor discusses industry developments and job performance needs with lower- and mid-level employees, and reads industry publications and corporate annual reports to gauge levels of social involvement. An auditor also could use a three-stage approach to acquire knowledge about an organization's operating environment: corporate guidelines, departmental policies and segment procedures.
Understand Corporate Policies
•   An auditor could acquire knowledge about a business entity's or an non-profit organization's social policies by inquiring from accounting, finance, charitable activities, human resource and governance departments. An auditor also could partner with external accountants and regulators to increase such knowledge. An auditor obtains relevant and appropriate "evidential matter" by applying auditing standards generally accepted in the industry in which a firm operates. Evidential matter is proof or evidence upon which an auditor provides an opinion.
Test Corporate Policies
•   An auditor tests a business entity's social policies to ensure that appropriate controls, procedures and guidelines exist, and that such controls comply with regulatory mandates, industry practices, corporate guidelines and ethical standards. An auditor also evaluates whether social policies are adequately designed and are operating effectively. Policies are adequate if they detail step-by-step procedures and mechanisms for task performance, management's decision processes and lines of hierarchy in social and philanthropic activities.
Test Account Balances
•   An auditor performs tests of "social" account balances in a business entity's financial statements to ensure that such balances are "fair" and "complete", and that they comply with accounting principles generally accepted in industries in which the entity operates. Social accounts could relate to activities involved in philanthropic donations, political contributions or other types of social undertakings. Fairness means objective or accurate in accounting, finance or audit parlance. Complete financial statements include a balance sheet, a statement of profit and loss, a cash flows statement and a statement of stockholders' equity.
Test Account Details
•   An auditor tests details of a corporation's social accounts to ensure that such accounts are not "materially" misstated, and that they are fair and complete. Such tests are referred to as substantive tests. Material in accounting parlance means substantial or significant. For example, an auditor reviewing Bank ABC's social procedures could verify that amounts recorded as charitable donations or environmental support contributions are accurate

Initial Steps of the Audit - Notification, Planning, Opening Meeting and Fieldwork
•   The 10 steps of the audit process begins with notification. The notification process alerts the party to be audited of the date and time of the process. The notification also will list the documents that the order wishes to review in order to understand the organization of the company. The next step, planning, is the steps the auditor takes, before the audit, to identify key areas of risk and areas of concern. This step is usually accomplished in a series of meetings with auditing staff. This leads up to the opening meeting between the auditing staff and senior management of the auditing target as well as administrative staff. The auditors will describe the process they will undertake. Management will describe areas of concern to them and the schedule of the employees that must be consulted. The next step, fieldwork, begins after the results of the meeting are used to adjust the final audit plans. Employees are notified of the audit, schedules are drawn up regarding the activities of the audit staff, and initial investigation is begun after learning of business procedures, interviewing key staff, testing current business practices by sampling, reviewing the law and testing internal rules and practices for reasonableness.
The Audit Itself - Communication, Draft Audit, Management Response
•   Communication is the next step. The audit team should consistently be in contact with the corporate auditor to clarify processes, gain access to documents and clarify procedures. At the completion of the audit, the next step, the draft audit, is prepared. The draft audit will detail what was done and what was found, a distribution list of parties to receive preliminary results, and a list of concerns. The draft is given to management to review, edit and suggest changes, probe areas of concern and correct errors. Upon making final corrections, the report is given to management for the seventh step, the management response. Management is requested to answer the report by stating whether they agree with the problems cited, the plan to correct noted problem and the expected date by which all issues will have been addressed.
Ending the Auditing Process-Final Meeting, Report Distribution, Feedback
•   The final meeting is designed to close loose ends, discuss the management response and address the scope of the audit. The ninth step is the report distribution, where the final audit report is sent to appropriate officials inside and outside the audit area. The last step is the audit feedback whereby the audited company implements the recommended changes and the auditors review and test the quality, adherence and effects of the adopted changes. This continues until all issues are adopted and the next audit cycle begins.


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Leo Lingham


In Managing a business, I can cover all aspects of running a business--business planning, business development, business auditing, business communication, operation management, human resources management , training, etc.


18 years of working management experience covering such areas
as business planning, business development, strategic planning,
marketing, management services, personnel administration.


24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.




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