Social accounting and audit is a comprehensive triple bottom line planning and measurement method.[1]
Social accounting and audit uses quantitative analysis of planned and actual measurement, ratio analysis for comparing trends over time, and qualitative analysis of constant comparison using ‘coding’ and ‘categorizing’ so that responses can be made and measured.
Social accounting and audit is an internal organizational system that is managed by the organization and moderated by an external independent evaluator. The social accounting and auditing system includes the triple bottom line of:
Commercial and financial – quantitative measurement is by regular data entry that is compared to quarterly and annual planned targets – a planned and actual method. Financial ratios are used to compare trends over time within the organization and comparisons with sector standards.
Social and community – measures internal and external none commercial planned objectives and operational methods through planned and actual accounting and through qualitative questions sets.
Environmental and society – measure the commercial and none commercial performance of an organization's use of energy, waste and waste disposal, physical resources, and transport and communication methods.
Social accounting and audit achieves its form of measurement by using the actual values of the items and processes that are measured as the form of measurement; instead of converting social and environmental benefits and responsibility into financial values.[2]
The Financial audit provides information relevant to shareholders, while social accounting and audit provide information relevant to society.
History
During the 1970 and 1980s co-operatives and social enterprises in the UK, Europe and the USA started to use the term ‘Social Audit’ as a way of describing non-financial measurement systems for commercial businesses. Social Audit Ltd, in the UK, undertook environmental assessments of companies who it considered to be high polluters. In Switzerland, the co-operative supermarket chain Migros undertook special interest audits of specific issues it felt worthy of investigation and called these Social Audits.
In America, the consultancy firm, Abt Associates, conducted a series of social audits incorporated into its annual reports. The social concerns addressed included "productivity, contribution to knowledge, employment security, fairness of employment opportunities, health, education and self-development, physical security, transportation, recreation, and environment". The social audits expressed Abt Associate's performance in these areas in financial terms and thus aspired to determine the company's net social impact in balance sheet form.
It wasn't until the late 1970s when Freer Spreckley developed an organizational Social Accounting and Audit system did Social Audit become an internal organizational system used by management of the organization to understand its commercial, social and environmental performance and influence. The social accounting and auditing system also allowed organizations to plan their social and environmental objectives with the same rigour they applied to plan their commercial objectives.
Current practices
Freer Spreckley introduced the first internal system for Social Accounting and Audit in his 1981 publication:[3]
Social Audit Network (SAN) is perhaps the best known organization in the UK delivering regular training and support to social enterprises and community enterprises.[4]
An audit is an "independent examination of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon." Auditing also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditors consider the propositions before them, obtain evidence, and evaluate the propositions in their auditing report.
A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan so that goals may be achieved. While a marketing plan contains a list of actions, without a sound strategic foundation, it is of little use to a business.
Marketing management is the organizational discipline which focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of a firm's marketing resources and activities.
SWOT analysis is a strategic planning and strategic management technique used to help a person or organization identify Strengths, Weaknesses, Opportunities, and Threats related to business competition or project planning. It is sometimes called situational assessment or situational analysis. Additional acronyms using the same components include TOWS and WOTS-UP.
The triple bottom line is an accounting framework with three parts: social, environmental and economic. Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create greater business value. Business writer John Elkington claims to have coined the phrase in 1994.
Quantitative research is a research strategy that focuses on quantifying the collection and analysis of data. It is formed from a deductive approach where emphasis is placed on the testing of theory, shaped by empiricist and positivist philosophies.
A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity in which it engages. KPIs provide a focus for strategic and operational improvement, create an analytical basis for decision making and help focus attention on what matters most.
A social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being. This may include maximizing social impact alongside profits for co-owners.
An information technology audit, or information systems audit, is an examination of the management controls within an Information technology (IT) infrastructure and business applications. The evaluation of evidence obtained determines if the information systems are safeguarding assets, maintaining data integrity, and operating effectively to achieve the organization's goals or objectives. These reviews may be performed in conjunction with a financial statement audit, internal audit, or other form of attestation engagement.
Social return on investment (SROI) is a principles-based method for measuring extra-financial value. It can be used by any entity to evaluate impact on stakeholders, identify ways to improve performance, and enhance the performance of investments.
Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. Internal auditing might achieve this goal by providing insight and recommendations based on analyses and assessments of data and business processes. With commitment to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice. Professionals called internal auditors are employed by organizations to perform the internal auditing activity.
Materiality is a concept or convention within auditing and accounting relating to the importance/significance of an amount, transaction, or discrepancy. The objective of an audit of financial statements is to enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in conformity with an identified financial reporting framework, such as the Generally Accepted Accounting Principles (GAAP) which is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC).
Internal control, as defined by accounting and auditing, is a process for assuring of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization.
Credit analysis is the method by which one calculates the creditworthiness of a business or organization. In other words, It is the evaluation of the ability of a company to honor its financial obligations. The audited financial statements of a large company might be analyzed when it issues or has issued bonds. Or, a bank may analyze the financial statements of a small business before making or renewing a commercial loan. The term refers to either case, whether the business is large or small. A credit analyst is the finance professional undertaking this role.
Control is a function of management which helps to check errors in order to take corrective actions. This is done to minimize deviation from standards and ensure that the stated goals of the organization are achieved in a desired manner.
The following outline is provided as an overview of and topical guide to accounting:
Sustainability accounting was originated about 20 years ago and is considered a subcategory of financial accounting that focuses on the disclosure of non-financial information about a firm's performance to external stakeholders, such as capital holders, creditors, and other authorities. Sustainability accounting represents the activities that have a direct impact on society, environment, and economic performance of an organisation. Sustainability accounting in managerial accounting contrasts with financial accounting in that managerial accounting is used for internal decision making and the creation of new policies that will have an effect on the organisation's performance at economic, ecological, and social level. Sustainability accounting is often used to generate value creation within an organisation.
Continuous auditing is an automatic method used to perform auditing activities, such as control and risk assessments, on a more frequent basis. Technology plays a key role in continuous audit activities by helping to automate the identification of exceptions or anomalies, analyze patterns within the digits of key numeric fields, review trends, and test controls, among other activities.
Management accounting principles (MAP) were developed to serve the core needs of internal management to improve decision support objectives, internal business processes, resource application, customer value, and capacity utilization needed to achieve corporate goals in an optimal manner. Another term often used for management accounting principles for these purposes is managerial costing principles. The two management accounting principles are:
Principle of Causality and,
Principle of Analogy.
Social accounting is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large. Social Accounting is different from public interest accounting as well as from critical accounting.
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