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Workplace audits refer to methods of assessing a wide range of procedures and policies in human resources as well as other parts of an entity. Such audits aim to determine areas that an organization needs to improve and help to ensure the business owners (Also see Characteristics of Successful Business Owners) to be following the employment laws and regulations. Typically, the auditors from audit firms in Johor Bahru will perform the workplace audits by using the checklists so that they may ensure that their audits cover the essential points which need attention.

The Process of Hiring

Hiring and orientation are among the first areas that the auditors (Also see Introduction to Audit) should include in the workplace audit. In the hiring process, the employers may need to write a job posting, interview the applicants, conduct pre-employment screenings, assess their skills, carry out drug testing, as well as present the job offer. Also, employers need to regulate the hiring process with equal opportunity and anti-discrimination laws. Auditing (Also see Principles of Auditing) the hiring and orientation process makes sure that the company adheres to the employment laws by checking the advertisements and the questions the employer has asked in the interview.

Compensation

The workplace audits will reveal the areas of opportunity in compensation structures in a company. In some countries, the authority may demand the employers to pay non-exempt employees a minimum wage and one and a half times of their pay rates if they work overtime. A workplace audit identifies whether the salaries, bonuses as well as other benefits that the employees obtain meet the standards. Besides, the auditors will determine whether the workers who perform the same tasks receive the same salary as required by law in the workplace audit.

Performance Evaluation

When the auditors carry out the workplace audit, they need to review the company’s process of performance evaluation. Usually, the employers will issue performance evaluations of their employees yearly. In the audit, the auditors should determine the aspects which are subjected to labour regulations and evaluate them. As an instance, the performance evaluation must adhere to privacy and discrimination laws. This means that the workplace audit should reveal the areas that the process of performance evaluation may violate the rights of the employees regarding their gender, race, religion, disability, or other characteristics.

Termination

A company can hardly exempt itself from employee turnover and termination. Nonetheless, unjustified termination is a critical legal issue. Companies can prevent themselves from committing wrongful termination by engaging with the auditors to perform a workplace audit to assess the termination procedures (Also see Techniques and Procedures of Internal Audits) that it is implementing. By conducting the audit, the auditors will make sure that the company is acting within the scope of the law when it notifies a worker about his or her termination and informs the worker about the benefits that he or she may obtain if there is any.

Compliance audits (Also see Types of Audit – Compliance Audit) refer to the formal reviews to identify whether an organisation is operating in compliance with the contractual agreement. Typically, a government regulatory agency, third-party organisation, or an independent audit firm in Johor Bahru will perform such an audit. The compliance audits pay more attention to the operations of a business. In contrast, the financial statement audits (Also see Essential Processes in the Audit of Financial Statements) focus on reviewing whether the company adhere to the related accounting standards or other financial regulations.

Internal Management

The auditors will start a compliance audit with interviewing the management of the company. The individuals who are involved in this process include the operational managers, directors, as well as the business owners (Also see Characteristics of Successful Business Owners). By interviewing them, the auditors will know to what extent the managers or the owners understand the terms and conditions of the contractual agreement. Besides, the business owners might experience a process of reviewing the contracts, which means that the auditors will go through their contractual agreement and review it. Typically, the auditors will create their audit plan by using this meeting. The plan includes certain areas that the auditors will assess or review the company’s processes against its contractual agreement.

Performance of the Employees

The auditors might interview some of the employees to find out their levels of understanding towards their responsibilities to the contractual agreement of the company. Usually, the auditors will perform this process without the presence of manager so that they can obtain honest opinions from the employees without being influenced by their superior. Once the auditors finish interviewing the employees, they may observe them when they are performing their daily tasks. They will examine whether the employees complete the company’s business functions in compliance with the contractual agreement and standard operating procedures (SOP) (Also see What are the Audit Procedures and Its Objective?) of the company.

Reviewing the Processes

To identify whether the company comply with the contractual agreement, the auditors will review its business processes. Usually, they will identify how well it completes its functions as well as determine whether there is any compliance violation in its systems. Violations may include undermining government regulations, wasting economic resources, producing products with low quality, as well as ignoring safety concerns. Typically, the auditors will consider the violations that take place and try to identify how widespread those violations can be in the operations of the company.

Final Analysis

Once the compliance auditors have finished performing the compliance audit, they will have a final wrap-up meeting with the management of the company. This meeting enables the managers of the company to review the auditor’s report before they release this information to the public. Besides, the auditors will give some suggestions to the company so that it may correct the violations or other errors in its processes. This meeting may also include third-party organisations so that they know how well the company is complying with its contractual agreements. When the compliance audit comes to an end, the auditors will issue the official report so that all parties that involve in the agreement and the public can review it.

When a company engage an accounting firm in Johor Bahru to conduct audit activities, based on the conditions, they may obtain two types of audit opinion (Also see Principles of Auditing) , which are the qualified audit opinion and the unqualified audit opinion.

Qualified Audit Opinion:

The qualified audit opinion is adjusted from the standard opinion because the presented financial statements are not true and fair, or the statements are not fairly presented according to the application framework and standard.

Usually, if the result of the audit testing shows that the financial statements (Also see Employ Accounting Service in Singapore To Prepare Financial Statements ) are presenting a true and fair view, the auditor will issue the standard unmodified opinion.

However, if the result of audit testing indicates that material misstatements are present, the auditor needs to modify his opinion.

Receiving qualified audit opinion from the auditor is not a piece of good news to the management and the firm since this type of opinion might cause the users to doubt the integrity of the management and financial statements of that firm.

The firm will issue the audit report to its shareholders, investors, as well as those charged with governance. This group of stakeholders will question the management of the qualified audit opinion. (Also see How to Ensure Your Company’s Audit Process Goes Smoothly?)

Sometimes, if the bankers require this report to allow them to examine the financial stability of a firm and how the integrity of the management is, they may not offer loan to it, or they will stop extending terms with it.

Unqualified Audit Opinion:

This occurs when the auditors review the financial statements of the company and conclude that they did not discover any material misstatement. This opinion is not the same as a qualified opinion. (Also see Audit – Introduction to Unqualified Opinion)

The auditors will issue the unqualified audit opinion on their client’s financial statements in their audit report when their client has prepared and presented those statements in all material aspect by following the appropriate accounting standards.

Nevertheless, people would use the term unqualified opinion to express an unmodified audit opinion.

If you search for ISA 700, Forming an Opinion and Reporting on Financial Statements, and browse for the term unqualified opinion, you will not see it.

The truth is that the standard uses the word “unmodified”. However, we will usually use both the words “unqualified” and “unmodified”.

When an auditor issues an unqualified opinion, it indicates that the average level of integrity of financial statements and the management who supervise the company is better than those companies that get a modified audit opinion.

This could be helpful to the management if they want to acquire more funds from the banks, investors, as well as the shareholders.