A healthy HR function in an organization is as the physical and mental well being of a human body. Typically the basic reason why organizations prefer to conduct an HR audit is to get a clear judgment about the overall status of the organization and also to find out whether certain systems put in place are yielding any results. HR audit also helps companies to figure out gaps or lapses and the reason for the same. Since every company plans certain systems and targets, an HR audit compares the plans to actual implementation.
The concept of HR audit has emerged from the practice of yearly finance and accounting audit, which is mandatory for every company, to be done by external statutory auditors.
This audit serves as an examination on a sample basis of practices and systems for identifying problems and ensuring that sound accounting principles are followed. Similarly, an HR audit serves as a means through which an organization can measures the health of its human resources functions.
Organizations undertake HR audits for many reasons:
1. To ensure effective utilization of human resources.
2. To review compliance with tons of laws and regulations.
3. To instill a sense of confidence in the human resources department that it is well managed and prepared to meet potential challenges and opportunities.
4. To maintain or enhance the organization’s reputation in a community.
An audit is a systematic process, which examines the important aspects of the function and its management, and is a means to identify strengths, weakness and areas where rectification may be warranted. An audit is done on sampling basis. And in sampling, not every instance or situation can be examined.
An HR audit can be used by an organization for multiple purposes. Some of the more common reasons are:
• To identify and address HR-related problems.
• To seek out HR-related opportunities.
• To conduct due diligence for mergers and acquisitions.
• To support initial public offerings.
How an audit is conducted is very often determined by it’s intended use. For instance the type of audit used to ascertain HR practices may be significantly different from the type of audit used to support an initial public offering. Although the areas examined may be similar, the process used and the depth of inquiry will vary from the intended outcome.
The audit process: HR audit process is conducted in different phases. Each phase is designed to build upon the preceding phase so that the organization will have a very strong overview of the HR function, at the conclusion of the audit. These phases include:

Pre-Audit information: This phase involves the acquiring and review of relevant HR manuals, handbooks, forms, reports and other information. Auditors forward a pre-audit information request to the client who compiles the necessary information for review.

Pre-Audit Self-Assessment: In order to maximize the time spent during subsequent portions of the audit, a pre-audit self- assessment form, if sent to the client can be of use.