Unlocking “Manpower Audit”: An Analysis

Unlocking “Manpower Audit”: An Analysis

Muthyaah Mohd Jamil¹, Muslimah Mohd Jamil²

¹Faculty of Accountancy, Universiti Teknologi MARA, Cawangan Selangor, Kampus Puncak Alam, Selangor, Malaysia

²Faculty of Accountancy, Universiti Teknologi MARA, Cawangan Kedah, Kampus Sungai Petani, Kedah, Malaysia

DOI: https://dx.doi.org/10.47772/IJRISS.2024.8100283

Received: 14 October 2024; Accepted: 23 October 2024; Published: 25 November 2024

ABSTRACT

Employee retrenchment is one reason for downsizing the business, which has become the norm in the organisation. The upskilling course seemed to be not important. Questions arise here about the effect of this strategy on the company or simply the company wanting to engage in technology. It is important to have a manpower audit to address this issue. Before stepping into deeper research, this paper aims to explore the existing literature regarding manpower audits. This paper employed thematic analysis. After establishing several exclusion processes, thirteen published articles were analysed. As a result, several themes, such as the purpose of the audit, theories employed, research methods, benefits and challenges of manpower audit, have been explored. This paper ended with discussion on future research should be employed on manpower audits.

Keywords— Auditing, Manpower Audit

INTRODUCTION

The effect and implementation of artificial intelligence have changed companies’ needs for employees—the issues of layoffs, retrenchments, and resizing escalated in most companies. Samsung Electronic Co. has laid off employees in Southeast Asia, Australia, and New Zealand (Poh & Lee, 2 Oct 2024). The decision was made to reduce the headcount of the employees in the organization. In Malaysia, Tick Tock, an application created by a Chinese company, ByteDance, announced laying off the employees (Ng, 11 Oct 2024). These two news stories were examples of companies practising it.

Another issue highlighted along this issue is the employees’ minimum wages. It has been discussed for a couple of years in Malaysia (Ong, 22 Jan 2024). Many companies cannot deliver high and standard wages to their employees without the government of Malaysia intervening in this issue. The government is required to provide subsidies to Malaysians’ minimum wages.

A question arises here about the functionality of Human Resource Development Funds (HRDF) to address these two issues. It is important to note that the HRDF plays a crucial role in providing training and upskilling in industries deemed critical in Malaysia (Yiau, 18 July 2024). An independent audit is needed to examine manpower audits and further validate the significant role HRDFs play in mitigating this issue.

This leads to another question: How can independent auditors solve these issues? It can be done by conducting a specific area of audit, a workforce audit (Andon et al., 2015; Batra, 1996; Chebat et al., 1994). The issues of manpower audit have been discussed since 1994. However, the discussion remains siloed, highlighting the urgent need for thorough implementation.

This paper would like to explore the literatures on manpower audits before conducting deeper research. The paper will begin by analyzing the article. Then, it will consider the purpose of conducting manpower audits. The next section will discuss the methods and theories used by the literature to address the issue. Finally, this paper will conclude by discussing the benefits of manpower audits.

METHODS

The paper undertook a comprehensive review, analysis, and synthesis of published research on manpower audits. To ensure a thorough search, a robust search string “manpower audit,” OR “skills audit”, OR “people audit”, OR “salary audit”, OR “human resources audit” was used across all databases, including Emerald, Science Direct, and Google Scholars.

The researchers meticulously adopted a staged approach, starting with an initial sample of 100 articles. The journals were further screened based on the available information, with a strict criterion that excluded non-English or Malay publications.

Thirty articles were to be reviewed. The researcher performed a second screening process based on the abstract and summary provided in the articles. The evaluation process assessed whether the articles would be able to answer the purpose of the study. This study excludes the discussion of human resources management for audit companies. Thirteen articles were used for this study.

This paper employed thematic analysis after analyzing 13 published articles. The thematic analysis comprises themes of purpose, research methods, theories, benefits, and challenges of internal auditors’ manpower audits. The themes were determined and explored. Comparative analysis was used to identify similar themes and differences found by other studies of remote auditing practices by internal auditors. The findings were synthesized to provide insights into future research on the issues of manpower audits.

Figure 1: Thematic Analysis

Purpose

A manpower audit can be defined as a comprehensive review of the human resources available in the organisation (Andon et al., 2015; Batra, 1996; Chebat et al., 1994). In the early years, several researchers illustrate the expansion of the auditing process, which begin from the traditional audit of financial statements to a more humanistic kind of audit (Andon et al., 2015; McGuire et al., 2022; Hyland & Verreault,2003; Batra, 1996; Chebat et al., 1994). The expansion is due to the demand for incorporating social elements into the audit process.

Several researchers highlighted the need for manpower or human resources auditing (Kupec et al., 2020; Bieliaieva, 2019; Tarasova, 2020; Negi & Chaubey, 2015; Chebat et al., 1994). They mentioned that the manpower audit is a detailed tool to determine whether the functionality of the human resources system aligns with the organisation’s goals and outcomes.

Another research had defined the scope of manpower audit as to assess the level of compliance for the human resources management system (Verreault & Hyland, 2005; Bieliaieva, 2019). The manpower audit is regarded as one of the monitoring tools for assessing the system’s compliance with the relevant rules and acts.

In addition, Adeyemo and Oriola (2010) further discussed the importance of using data mining techniques in conducting manpower audits (Adeyemo & Oriola, 2010). They mentioned that data mining techniques help to improve the effectiveness of manpower audits.

In the 2020s, the world business environment changed, and companies became more focused on Industrial Revolution 4.0. Thus, the manpower audit changed its focus by using manpower audits to assess employee demand in that era (Szarková, 2020). In another context, the literature has expanded the discussion on manpower audits to solve the issues of power abuse in healthcare settings (Evans et al., 2023).

RESEARCH METHODS

The literature on the manpower audit can be divided into two common research methods, which are quantitative and qualitative, as depicted in the table below:

Table 1: Division of

Most of the existing literature delves into the conceptual paper on manpower audits, a significant piece that outlines the evolution of the need for a manpower audit (Andon et al., 2015; Negi & Chaubey, 2015) and the advocacy for a social audit (McGuire et al., 2022).

Verreault and Hyland’s (2005) study, a comprehensive review of cross-sectional studies from various countries on human resources management, particularly in the auditing process, offers a global perspective. The study suggests that the overall self-assessment in a human resources management system can be considered atype of manpower audit, providing a broad understanding of the topic.

Another study utilizes content analysis methods to assess the development of an internal audit system in government bodies. The other study discusses the human resources audit process (Negi & Chaubey, 2015). The study collects the data from questionnaires on the view of the human resources audit towards IR 4.0 and 5.0.

Besides, a study utilised surveys to investigate auditors’ and auditee or management perspectives (Kupec et al., 2020). From the management perspective, this study focuses on measuring the satisfaction level of the management by using auditors as tools for supervising purposes.
One study employed cutting-edge technology, an Artificial Neural Network and Decision Theory Logarithm, to determine the auditing manpower needed to appoint and promote the Nigerian teaching Staff (Adeyemo & Oriola, 2010). Meanwhile, another study used the DEA model to assess the efficiency of auditing marketing and human resources allocations (Chebat et al., 1994). The study focuses on the data from managers in Canada, showcasing the use of advanced methods in auditing research.

For the qualitative methods, the study by Evans et al. (2023) was used to analyze the posting messages on social media as the data collection point. The study analyzes posting messages from Reddit without names to remain anonymous and maintain the secrecy of the respondents regarding sensitive information, demonstrating a commitment to ethical research practices.

Other studies use mixed methods to examine auditors’ views on the human resources function (Hyland & Verreault, 2003). The results indicate that auditors need to audit human resources. However, there is a huge gap between auditors’ knowledge and human resources management.

Theories

Most studies are grounded in the counterfactual theories of causation (Evans et al., 2023; Kupec et al., 2020; Bieliaieva, 2019; Negi & Chaubey, 2015; Hyland & Verreault, 2003). For example, Evans et al. (2023) used this theory to show how audits can effectively resolve abuse, while Kupec et al. (2020) applied it to demonstrate how audits can be a useful management tool for improving museum operations.

Another study, using counterfactual theories of accusation and four quadrant typologies, examined the compliance and risk management focus in internal audits (Hyland & Verreault, 2003). The study’s findings underscore the importance of aligning audit engagement with strategic human resources management for a more effective auditing process.

One study, by Negi & Chaubey (2015), utilized the human resources effectiveness evaluation theory. This theory underscores the pivotal role of human resources in the effectiveness of audits. It emphasizes that the commitment of auditors and management in manpower audit engagement is a key determinant of human resources effectiveness.

The study by Andon et al. (2015) proposed that the auditing discussion utilizes Bourdie’s theory of practices to explain the construction of social elements in audit practices. Bourdie’s theory explains the usage of social constructs in audit engagements. The next thematic analysis is the benefit of manpower audit.

Benefits

It is important to acknowledge that the literature overwhelmingly supports the practice of manpower audits. The manpower audit is a collaborative process that aligns the human resources management system with the organisation’s objectives. This process involves a comprehensive review of the current workforce, including their roles, responsibilities, and performance, to identify any inefficiencies or areas for improvement (Schuler & Jackson, 2015; Kupec et al., 2020; Negi & Chaubey, 2015; McGuire et al., 2022; Hyland & Verreault,2003; Batra, 1996; Chebat et al., 1994). It not only allows for the identification of loopholes and weaknesses but also empowers the human resource department to take corrective actions. This process amplifies the voices of both management and staff, making them feel included and part of the solution in improving the organization’s goals.
Moreover, the audit process for the workforce is a powerful tool for improving the performance of the personnel in the organisation (Schuler & Jackson, 2015; Kupec et al., 2020; Tarasova, 2020; Negi & Chaubey, 2015; McGuire et al., 2022; Batra, 1996). This process not only reveals the workloads and their variations but also enables the management to identify and rectify any duplication of work or the need for additional manpower to meet production demands. It also aids in assessing and resolving any duplication of responsibilities, instilling a sense of reassurance and confidence in the management.

In addition, the manpower audit plays a crucial role in helping the organisation improve the resources allocated for employees (McGuire et al., 2022). The audit engagement can highlight the resources needed for the employees to exercise their duties within the organisation, providing a sense of reassurance and confidence in the management. The audit is believed to reduce issues related to miscommunication regarding resource allocation.

Narrowing it to the medical field, the manpower audit is a powerful tool believed to settle the abuse of power in the hospital (Evans et al., 2023). When reported abuse cases occur, the auditors should be mindful. Mindfulness is a sense of responsibility and awareness of the effects of misbehaving on the profession, providing a sense of security and protection for all involved.

Challenges

Cost and benefits are the most common challenges in every audit practice. The cost can be calculated based on the time spent and the organisation’s size (Bieliaieva, 2019; Andon et al., 2015; Hyland & Verreault,2003). This process will incur huge costs if the organisation has a large number of people. The auditors require a longer time to gather evidence about their employees.

The second hurdle is the data collection process (Rao, 2019). The auditors struggle to obtain accurate and comprehensive information about employee performance and skills. The process requires auditors’ skills to conduct the audit engagements (McGuire et al., 2022; Hyland & Verreault,2003).

The organisation culture is the main reason for the manpower audit to achieve the goals (Kupec et al., 2020; Batra, 1996)). If the mindless culture is on the benefit of manpower audits, the organisation will never realise the effectiveness of the audit practices. Government support is needed to ensure the manpower audit can be practised in the long run.

DISCUSSION AND CONCLUSIONS

The concept of manpower audit should be further assessed as the concept of traditional auditing practices seems to be irrelevant to the current business environment. The usage of technology and globalisation attract companies to focus on the retrenchment of employees and restructuring organisations without looking at the importance of having employees. Thus, the manpower audit is a pivotal element that must be audited separately without looking at the revenue and cost. The auditor, in this context, plays a crucial role in assessing the effectiveness of the role, the efficiency of the work description, the productivity of jobs and the needs to work for the organisation.

Though much literature has outlined the purpose of manpower audits, there is no discussion of the purpose of manpower audits pertaining to the Industrial Revolution and the usage of artificial intelligence. The purpose of manpower audit can be further defined as most people know that this issue can reduce the need to have more employees. In practical terms, this can lead to cost savings, improved productivity, and a more efficient allocation of resources.

There is a pressing need for more qualitative research on how the manpower audit is implemented in organisations. This type of research focuses on real-world applications rather than theoretical concepts and can provide valuable guidance for organisations in establishing procedures and policies. It can also be useful for government authorities seeking to understand and regulate manpower practices. The majority of the literature used cause-and-effect effect theories to explain the research. It seems that this manpower audit does not relate to the company’s management company. There is an established published integrated auditing management theory, so this manpower power seems to have a place in the organisation. The majority of the literature discussed the benefits of the manpower act as a whole. As they evolved, many businesses had unique executing business processes. Organisations have ways of utilising their manpower. Therefore, there is a need to craft research that focuses more on evaluating the benefits of organisations in action in a niche way, offering a promising future for manpower audits.

This study proposes that researchers also examine the role of auditors in the disclosure of human resources as part of the environmental, social, and governance (ESG) agenda. The ESG agenda is a framework for evaluating a company’s performance in these three areas, and by understanding the detailed audit engagement process, we can gain insights into the compliance level towards the disclosure requirements, which has broader implications for corporate governance and social responsibility.

Even though the discussion of manpower audit can be regarded as old, the issues remain highly relevant in the current economic environment. The inflation rate continues to increase despite the increase in the price of consumption, and the remuneration and workload of the employees remain constant. The well-being of countries depends on the well-being of society as a whole, making the discussion of manpower audit a crucial and engaging topic in the current economic climate.

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