TYBMS SEM-6 Human Resource: Human Resource Accounting & Audit (QP April 2024 with Solutions)

 Paper / Subject Code: 86016/ Elective: Human Resource: Human Resource Accounting & Audit

TYBMS SEM-6 

Human Resource: 

Human Resource Accounting & Audit 

(QP April 2024 with Solutions)

Note: 1. Questions compulsory.

2. Q2 to Q5 is compulsory with internal choice.

3. Figures to the right indicate marks.

Q1. (A) Multiple choice question (Any 8)    (8)

1) HRA was first developed by _________ in the year 1691.

a. Sir William Petty

b. Lee Brummet

c. Rensis Likert

d. Eric Flamholtz

2) Welfare cost is part of ________ cost.

a. Additional cost

b. Acquisition cost

c. Training cost

d. Development cost

3) ________ refers to the costs incurred right time and in right quantity. in acquiring the right man for the right job at the right time and in right quality.

a. Additional cost

b. Requisition

c. Acquisition cost

d. Training cost

4) The object of modern audit is to report on _______ position. 

a. Market

b. Financial

c. Social

d. Present

5) _______ refers to the sacrifice that would have to be incurred to replace presently owned resources.

a. Replacement cost model

b. Opportunity cost model

c. Historical cost approach

d. Economic value model

6) which of the following is non monetary method of valuation of HR

a. Historical cost method

b. Opportunity cost method

c. Replacement cost method

d. Expected realizable value method

7) _______ is compulsory contributory fund for the future of employees after their retirement or for their dependents in case of their early death.

a. PF

b. TDS

c. PT

d. Gratuity

8) HR valuation report helps the management to control all _______ related to HR department

a. income

b. profit

c. loss

d. cost

9) HRA is an ________ ideology

a. employer oriented

b. employer employee mutually benefiting

c. employee oriented

d. profit maximising

10) All actual cost incurred on recruitment, training, familiarization are capitalized in ________ cost method.

a. Historical

b. Replacement

c. Economic

d. Opportunity

Q1. (B) State whether the given statement is true or false (Any 7)        (07)

1. Historical cost accounting concept are unrealistic profit.

Ans: True

2. Human resource accounting is mandatory.

Ans: False

3. In HRA there are no measurement problem.

Ans: False

4. Workshop method of conducting HR audit is very rigid.

Ans: False

5. Dynamism of industries create problems of human capital measurement.

Ans: True

6. Professional tax or employment tax is an institute-based tax.

Ans: False

7. Replacement method is a monetary method of human valuation.

Ans: True

8. Out of many one-role of auditor is to collect relevant fact.

Ans: True

9. Questionnaire method is highly unscientific.

Ans: False

10. Under statistical approach the result of one organization is compared with the industry standard.

Ans: True

Q2. A) Explain the component of Acquisition Cost    (7)

The acquisition cost refers to the total cost incurred to acquire an asset, which is an important component in financial and accounting practices, particularly for valuing assets like property, plant, equipment, or even human resources. Here’s a detailed breakdown of the components involved in acquisition cost:

1. Purchase Price

• Definition: The initial amount paid to acquire the asset.
• Example: If a company buys a piece of machinery for $50,000, this price is part of the acquisition cost.

2. Legal and Registration Fees

• Definition: Costs associated with the legal documentation, transfer of ownership, and any registration requirements for the asset.
• Example: Fees paid to lawyers for preparing contracts, property title registration, or patent filings.

3. Transportation and Delivery Costs

• Definition: Expenses related to the transportation or shipping of the asset to its intended location.
• Example: Freight charges for transporting raw materials or machinery to a factory site.

4. Installation and Setup Costs

• Definition: Costs incurred for setting up or installing the asset so that it is ready for use.
• Example: Hiring technicians to install machinery or configuring software on a new computer.

5. Training Costs

• Definition: Expenses for training employees to use the new asset effectively.
• Example: Costs associated with training sessions or workshops to ensure staff can operate new machinery or systems.

6. Initial Testing and Inspection Costs

• Definition: Costs to inspect or test the asset to confirm it functions correctly and meets required standards before being used in operations.
• Example: Testing equipment to ensure it operates correctly or inspecting construction work for compliance with building codes.

7. Improvements and Enhancements

• Definition: Costs for modifications or enhancements that increase the asset's value or extend its useful life, considered part of the acquisition cost if they occur at the time of purchase.
• Example: Upgrading the engine of a vehicle at the time of purchase or adding custom features to new office equipment.

8. Transaction Fees and Commissions

• Definition: Fees paid to brokers, agents, or other intermediaries involved in the acquisition process.
• Example: Commission paid to a real estate agent or a broker fee for purchasing a business.

B) What do you mean by HR Accounting? Explain its historical development.    (8)

Human Resource Accounting (HRA) is a method of measuring and reporting the value of human resources within an organization. It focuses on quantifying the economic value of employees as assets rather than just costs. HRA aims to capture the contribution of employees to the organization's value, helping management make more informed decisions related to training, recruitment, and overall human capital management.

Objectives of HR Accounting:

• Quantifying the value of employees: Measuring the monetary value that human resources add to an organization.
• Improving decision-making: Providing data to assist in strategic planning, such as budgeting for training or recruitment.
• Demonstrating human resource value: Showing how investments in human capital impact the organization’s overall worth and success.
• Enhancing performance management: Linking the value of employees with their productivity and potential for growth.

Historical Development of HR Accounting:

The development of HR Accounting can be traced through several stages:

1. Early Concepts (Pre-20th Century)

• Before the 20th century, human resources were not viewed as assets. The focus was primarily on physical assets and financial resources, while human capital was considered an expense rather than an investment.

2. Initial Ideas (1960s)

• The concept of HRA started gaining attention in the 1960s as businesses began recognizing the importance of their workforce for organizational growth and success.
• Rensis Likert, a management theorist, was one of the early advocates who suggested that human resources should be valued and accounted for to reflect their contribution to the organization.

3. Pioneering Work (1960s - 1970s)

• The American Institute of CPAs (AICPA) conducted studies on HRA in the 1960s, marking the beginning of formal research into the topic.
• Jac Fitz-enz and Leopold Bellak were notable contributors during this period who discussed the need for systematic valuation of human capital and proposed methods for measuring employee value.

4. Developments by Researchers and Practitioners (1970s - 1980s)

• The field saw significant theoretical advancements with the introduction of models for valuing human resources. These included the cost approach, the economic value approach, and the present value approach.
• Dr. Eric G. Flamholtz and Dr. Robert L. Kaplan developed frameworks for calculating human capital by focusing on factors such as training, experience, and potential for future contributions.

5. Formalization and Global Interest (1980s - 1990s)

• In the 1980s and 1990s, HR Accounting evolved into a recognized area of study and practice. Companies began experimenting with different methodologies for HRA, including both monetary and non-monetary approaches.
• The Human Resource Accounting Standards Board (HRASB) and other international bodies aimed to establish guidelines for standardized approaches to measuring human resources.

6. Modern Developments and Technological Integration (2000s - Present)

• With advancements in technology and data analytics, HR Accounting has become more sophisticated. Tools and software that allow organizations to assess and manage employee data have become integral to HR practices.
• Organizations now utilize metrics that blend quantitative data (e.g., employee turnover rates, productivity levels) and qualitative assessments (e.g., employee engagement surveys) to provide a more holistic view of human capital value.

Methods Used in HR Accounting:

• Historical Cost Method: Calculates the cost incurred to acquire, train, and develop employees. This includes recruitment, training expenses, and other costs incurred during the employment period.
• Replacement Cost Method: Assesses the cost of replacing an existing employee with someone of equal skill and productivity.
• Present Value Method: Estimates the future value of the contributions an employee will make to the organization, discounted to its present value.
• Economic Value Method: Values employees based on their potential to contribute to the organization's revenue and profit.

Challenges in HR Accounting:

• Measurement and Valuation: Difficulty in quantifying the exact economic value of employees due to their intangible nature and the impact of external factors.
• Standardization: Lack of universal standards for assessing human capital, leading to inconsistencies in application.
• Subjectivity: The process often involves subjective judgments that can affect the accuracy and reliability of valuations.
• Acceptance and Implementation: Despite its potential, many organizations are slow to adopt HRA due to costs, complexity, and the traditional view of human resources as an expense.

OR

Q2.P. Discuss the benefits and limitations of HR Accounting.    (15)

Human Resource Accounting (HR Accounting) is the process of identifying, measuring, and reporting the value of an organization's human assets. It is based on the principle that employees are valuable assets that contribute to an organization's success and should be accounted for in financial statements, similar to physical assets. HR accounting seeks to quantify the monetary value of employees' skills, knowledge, and abilities.

Benefits of HR Accounting

1. Enhanced Decision-Making:

   • Provides management with valuable data about the monetary value of the workforce.
   • Helps in making strategic decisions related to recruitment, training, development, and retention of talent.

2. Improved Resource Allocation:

   • Allows for better allocation of training and development budgets by identifying the value that investment in human resources brings to the organization.
   • Helps prioritize which areas or departments contribute most to the overall value.

3. Strategic Planning:

   • Facilitates long-term planning by providing insights into workforce trends and their impact on the company's financial health.
   • Assists in aligning HR strategies with the organization's overall strategic objectives.

4. Performance Evaluation:

   • Enables companies to evaluate the performance of employees in terms of their contribution to the company's financial value.
   • Helps assess whether the cost of employee investments (e.g., training, development) is justified by the value they bring.

5. Demonstrates the Value of Human Capital:

   • Highlights the significance of human capital as an integral part of the organization’s assets.
   • Provides a clearer picture of an organization's true worth, especially for investor and stakeholder communications.

6. Supports HR Initiatives:

   • Strengthens the HR department’s credibility by showcasing its impact on the company's value.
   • Justifies HR-related expenses and projects by quantifying their return on investment.

7. Benchmarking and Comparison:

   • Allows companies to compare their human capital valuation with competitors and industry standards.
   • Helps in identifying areas of strength and opportunities for improvement.

Limitations of HR Accounting

1. Subjectivity and Difficulty in Valuation:

   • The valuation of human assets is often subjective and depends on various assumptions, making it difficult to standardize.
   • Different organizations may use different methodologies for calculating human capital value, leading to inconsistencies.

2. Lack of Established Standards:

   • There are no universally accepted accounting standards for HR accounting, which limits its application and comparability.
   • This lack of standardization makes it challenging to interpret and compare HR data across different organizations.

3. Intangible Nature of Human Capital:

   • Human capital involves intangible aspects such as creativity, loyalty, and team dynamics that are difficult to quantify.
   • It is challenging to measure non-tangible attributes accurately using financial metrics.

4. High Costs and Complexity:

   • Implementing an HR accounting system can be costly and time-consuming, requiring specialized software and expertise.
   • The process of quantifying and maintaining human capital data can be complex and resource-intensive.

5. Potential for Misinterpretation:

   • The financial figures derived from HR accounting can be misinterpreted if not understood in context.
   • Overemphasis on human capital valuation can lead to an oversimplified view that disregards other important factors affecting business success.

6. Short-Term Focus:

   • HR accounting often focuses on quantifiable metrics that may prioritize immediate financial returns over long-term employee development.
   • This can result in decisions that benefit short-term financial statements but may harm long-term company growth and sustainability.

7. Legal and Ethical Concerns:

   • Assigning monetary value to employees can raise ethical and legal questions about how human capital is treated and perceived.
   • It may inadvertently dehumanize the workforce and create potential challenges with employee relations and trust.

8. Difficulty in Capturing Dynamic Workforce Changes:

• The value of human resources can change rapidly due to factors such as market shifts, technological advancements, and changes in employee skills.
• HR accounting models may not be able to adapt quickly to these dynamic changes, resulting in outdated or irrelevant valuations.

Q3. A) Explain the replacement cost model with its advantages & limitations    (15)

The replacement cost model is a valuation approach used to estimate the value of an asset by determining the cost of replacing it with a similar or equivalent asset at current market prices. It is commonly used in accounting, insurance, and asset valuation to assess the value of assets based on their replacement or reproduction costs.

Advantages of the Replacement Cost Model:

1. Objective and Tangible Measurement: The replacement cost model provides an objective and tangible measure of an asset's value. It focuses on the actual cost of replacing the asset with a similar one in the current market, which can be more straightforward and reliable compared to other valuation methods that rely on subjective estimates or market fluctuations.

2. Reflects Current Market Conditions: By considering current market prices, the replacement cost model reflects the prevailing economic conditions and market dynamics. It provides an up-to-date valuation that reflects the cost of acquiring a comparable asset in the current market, which can be particularly relevant in volatile markets or when market prices are rapidly changing.

3. Useful for Insurance Purposes: The replacement cost model is commonly used in insurance to determine the appropriate coverage and indemnity for assets. Insuring assets based on their replacement costs ensures that the policyholder can fully recover the cost of replacing the asset in the event of a covered loss or damage.

4. Straightforward and Easy to Understand: The replacement cost model is relatively simple and easy to understand. It involves assessing the current market prices of similar assets and calculating the cost of acquiring a replacement. This simplicity makes it accessible to individuals and organizations without extensive financial expertise.

Limitations of the Replacement Cost Model:

1. Ignores Appreciation or Depreciation: The replacement cost model focuses solely on the cost of replacing an asset and does not consider any appreciation or depreciation in the asset's value over time. It does not account for factors such as asset age, condition, technological advancements, or changes in market demand, which can impact an asset's actual market value.

2. Inaccurate for Unique or Specialized Assets: The replacement cost model may not provide an accurate valuation for unique or specialized assets that have limited availability in the market. If a comparable replacement is not readily available or if the market for the asset is illiquid, the replacement cost model may not accurately reflect the true value of the asset.

3. Excludes Consideration of Functional Obsolescence: The replacement cost model focuses on the physical replacement of an asset and does not account for functional obsolescence. Functional obsolescence refers to a reduction in an asset's value due to changes in technology, design, or market preferences. The replacement cost model may not capture the impact of functional obsolescence on an asset's value.

4. Limited Applicability for Unique Features or Intangibles: If an asset has unique features or intangible qualities that cannot be easily replaced or replicated, the replacement cost model may not accurately capture its value. The model's reliance on the cost of acquiring a similar asset may not account for the unique attributes or intangible value associated with the original asset.

5. Potential Cost Fluctuations: The replacement cost model assumes that the cost of acquiring a replacement asset remains constant. However, market conditions, supply and demand dynamics, and other factors can lead to fluctuations in replacement costs over time. Failure to account for these fluctuations may result in inaccurate valuations.

OR

Q3. P). Explain Economic value added (EVA) model with its advantages.    (8)

Economic Value Added (EVA) is a financial performance metric that measures the true economic profit of a company. It was developed by the consulting firm Stern Stewart & Co. and is used to assess the value created by a company above its cost of capital. EVA focuses on the notion that a business should generate returns that exceed its cost of capital to create wealth for its shareholders.

The formula for EVA is:

$$\text{EVA }= \text{Net Operating Profit After Taxes (NOPAT)}-(\text{Capital Invested }\times \text{Cost of Capital)}$$

Explanation of the Components:

1. Net Operating Profit After Taxes (NOPAT): Represents the company’s profit generated from operations after taxes, excluding the impact of interest expenses. It reflects the profitability of core business activities.
2. Capital Invested: The total amount of capital invested in the business, which can include equity and debt.
3. Cost of Capital: The required rate of return that investors expect from an investment in the company. It represents the opportunity cost of investing in that particular company as opposed to other investments with similar risk profiles.

Advantages of the EVA Model:

1. Focus on True Economic Profit:

   • EVA highlights whether a company is generating returns that exceed its cost of capital. If EVA is positive, the company is creating value; if negative, it is destroying value.
   • This helps stakeholders understand the real profitability of a company beyond traditional accounting metrics like net income.

2. Aligns Management and Shareholder Interests:

   • The EVA model can incentivize management to make decisions that enhance shareholder value. Since EVA takes the cost of capital into account, it discourages investments that do not provide adequate returns.
   • It fosters a culture where decisions are made with a focus on value creation rather than just revenue or profit growth.

3. Measures Performance on a Comprehensive Basis:

   • Unlike traditional profitability metrics, EVA incorporates the cost of capital, making it a more comprehensive measure of performance.
   • This helps in assessing the efficiency and effectiveness of a company’s use of its capital.

4. Supports Strategic Planning and Decision-Making:

   • EVA can be used to evaluate and prioritize projects or investments by calculating their potential to generate positive EVA.
   • It assists management in choosing projects that will likely create value, leading to better strategic planning and resource allocation.

5. Provides a Clear Indicator of Value Creation:

   • EVA provides an unambiguous figure indicating whether the company is meeting or exceeding the expectations of its investors.
   • This helps in clear communication with shareholders about how well the company is performing relative to the cost of financing its activities.

6. Improves Accountability:

   • By incorporating the cost of capital, EVA encourages managers to be more accountable for their use of company resources.
   • It can highlight areas of inefficiency or underperformance in operations that need to be addressed.

7. Helps in Compensation and Incentive Programs:

• Companies often use EVA as a basis for performance-based compensation, ensuring that executives are rewarded for value-creating behavior.
• Linking executive compensation to EVA can align their interests with those of shareholders, fostering better corporate governance.

Q3.Q. Define and explain the limitations of historical cost.        (7)

Historical cost refers to the original monetary value of an asset or liability at the time of acquisition or incurrence. In accounting, this value is used to record and report assets and liabilities on the financial statements. Historical cost is based on the actual transaction price and does not consider subsequent changes in market value.

Limitations of Historical Cost

1. Lack of Relevance in Current Conditions:

   • Historical cost does not reflect the current market value of assets or liabilities.
   • As a result, it may not provide accurate information for decision-making, especially in inflationary environments.

2. Ignores Changes in Purchasing Power:

   • Over time, inflation or deflation can significantly alter the value of money.
   • Historical cost accounting fails to adjust for these changes, leading to outdated valuations.

3. Understatement of Asset Values:

   • Fixed assets, such as real estate or equipment, may appreciate over time, but their value remains recorded at the original cost.
   • This understatement can misrepresent the financial health of the organization.

4. No Reflection of Opportunity Cost:

   • Historical cost does not account for the potential income that could have been earned if resources were allocated differently.
   • This omission limits its usefulness for assessing opportunity costs in decision-making.

5. Limited Comparability:

   • Organizations using historical cost may have assets acquired at different times, leading to inconsistent valuations.
   • This inconsistency reduces comparability between entities or across reporting periods.

6. Potential for Misleading Financial Ratios:

   • Ratios like return on assets (ROA) or debt-to-asset ratios may be distorted due to outdated asset values.
   • Such distortions can affect investors’ and stakeholders’ evaluations.

7. Inadequate for Intangible Assets:

   • Historical cost does not effectively capture the value of intangible assets like patents, brands, or goodwill.
   • These assets often increase in value due to factors like innovation or market demand.

8. Bias Toward Stability:

   • Historical cost accounting emphasizes consistency and reliability over relevance.
   • This can result in financial statements that are less responsive to economic changes.

9. Challenges in Accounting for Depreciation:

• Depreciation is based on historical cost, which may not align with the current replacement cost of an asset.
• This can lead to mismatches in cost allocation over the asset's useful life.

Q4. A) Explain the principles of effective HR auditing        (8)

An effective HR audit is built upon a set of guiding principles that ensure the process is thorough, objective, and valuable for the organization. These principles are:

1. Systematic Approach:

   • The audit should follow a structured process with clearly defined steps, including planning, data collection, analysis, and reporting.
   • Each HR function, policy, or system should be evaluated comprehensively and consistently.

2. Objectivity:

   • The audit must be unbiased and impartial to provide an accurate assessment.
   • External auditors or neutral internal teams can be engaged to reduce the risk of favoritism or subjectivity.

3. Alignment with Organizational Goals:

   • The audit should focus on how HR practices contribute to achieving the organization’s mission, vision, and strategic objectives.
   • It should evaluate whether HR activities are supporting business needs effectively.

4. Focus on Compliance:

   • Ensuring adherence to legal and regulatory requirements is a fundamental aspect of an HR audit.
   • Policies and practices should comply with labor laws, industry standards, and ethical guidelines.

5. Employee-Centric Evaluation:

   • The audit should consider the impact of HR policies on employee satisfaction, engagement, and productivity.
   • Employee feedback and perspectives can provide valuable insights.

6. Risk Identification and Mitigation:

   • The audit should identify potential risks, such as legal non-compliance, employee grievances, or inefficiencies.
   • It should provide actionable recommendations to mitigate these risks effectively.

7. Confidentiality:

   • Sensitive employee and organizational data must be handled with strict confidentiality during the audit process.
   • Ethical guidelines should be followed to maintain trust and integrity.

8. Future-Oriented Analysis:

   • The audit should not only assess past and present HR performance but also identify trends and prepare for future challenges.
   • Recommendations should include strategies for continuous improvement and adaptability.

9. Benchmarking and Comparability:

   • HR audit findings should be compared with industry standards or best practices to assess relative performance.
   • Benchmarking helps identify gaps and areas for improvement.

10. Actionable Recommendations:

    • The audit should conclude with practical, data-driven suggestions for enhancing HR effectiveness.
    • Recommendations should be specific, measurable, and aligned with organizational priorities.

11. Regular and Periodic Auditing:

    • HR audits should not be a one-time activity; regular audits ensure ongoing compliance and improvement.
    • Periodic reviews help in adapting to changes in laws, technology, and organizational goals.

12. Stakeholder Engagement:

• Involvement of key stakeholders, including management and employees, ensures that the audit is comprehensive and that findings are actionable.
• Collaboration fosters a shared commitment to implementing improvements.

B) What is Human Resource audit? Explain its objectives.        (7)

A Human Resource (HR) Audit is a systematic and comprehensive review of an organization's HR policies, practices, procedures, and systems. It evaluates how effectively these elements support the organization's goals, ensure compliance with laws and regulations, and foster a productive work environment. The audit identifies strengths, weaknesses, and areas for improvement in the HR function.

Objectives of HR Audit:

1. Assess HR Effectiveness:

   • Evaluate the performance and efficiency of HR activities, such as recruitment, training, compensation, and performance management.
   • Determine if HR practices meet organizational goals and contribute to overall productivity.

2. Ensure Compliance:

   • Check adherence to labor laws, employment regulations, and organizational policies.
   • Identify and address potential legal or regulatory risks to avoid penalties or disputes.

3. Align HR with Strategic Goals:

   • Ensure HR strategies and practices align with the organization's mission, vision, and long-term objectives.
   • Assess the role of HR in supporting business growth and competitiveness.

4. Identify Gaps and Risks:

   • Highlight inefficiencies, inconsistencies, or risks in HR policies and procedures.
   • Propose solutions to mitigate risks and close performance gaps.

5. Improve Employee Satisfaction:

   • Review employee engagement, satisfaction, and morale.
   • Identify ways to enhance the workplace culture and foster a positive employee experience.

6. Enhance Decision-Making:

   • Provide management with actionable insights and data-driven recommendations for improving HR functions.
   • Support informed decisions regarding workforce planning, talent management, and organizational development.

7. Foster Continuous Improvement:

   • Create benchmarks for HR practices and track progress over time.
   • Encourage innovation and adaptability in HR policies and systems.

8. Optimize Resource Utilization:

   • Evaluate the allocation of HR resources, such as time, budget, and personnel.
   • Recommend strategies to maximize efficiency and reduce costs.

9. Support Change Management:

• Assess the organization's readiness for change and the effectiveness of HR in managing transitions.
• Align HR practices with evolving business needs and external factors.

OR

Q4. P) Explain the features & objective of HR Audit.        (15)

Features of HR Audit:

1. Systematic Process:

   • HR audit follows a structured and methodical approach to assess HR policies, practices, and procedures.
   • It involves planning, data collection, analysis, and reporting.

2. Comprehensive Review:

   • Covers all HR functions, including recruitment, training, performance management, compensation, compliance, and employee relations.
   • May also include emerging areas like diversity, equity, and inclusion (DEI).

3. Objective Evaluation:

   • Aims to provide an unbiased analysis of the effectiveness and efficiency of HR functions.
   • Identifies strengths, weaknesses, opportunities, and threats (SWOT analysis).

4. Compliance Check:

   • Ensures adherence to labor laws, employment regulations, and internal policies.
   • Mitigates risks of legal and ethical violations.

5. Performance-Oriented:

   • Evaluates the contribution of HR practices to organizational goals.
   • Focuses on aligning HR functions with strategic business objectives.

6. Forward-Looking:

   • Not just about past performance; it provides actionable insights and recommendations for improvement.
   • Helps in planning for future HR challenges and opportunities.

7. Customizable Scope:

   • Can be conducted for the entire HR function or specific areas, such as recruitment or employee engagement.
   • Scaled according to the organization's size and industry requirements.

Objectives of HR Audit:

1. Assess Effectiveness:

   • Determine how well HR policies and practices support organizational goals.
   • Evaluate whether HR activities are cost-effective and aligned with business strategy.

2. Ensure Compliance:

   • Verify adherence to employment laws, regulations, and ethical standards.
   • Identify gaps in compliance to reduce risks of legal penalties or disputes.

3. Enhance Decision-Making:

   • Provide data-driven insights to improve HR decision-making and strategy.
   • Support leadership with actionable recommendations.

4. Identify Gaps and Risks:

   • Uncover inefficiencies, inconsistencies, or risks in HR practices.
   • Highlight areas for improvement to enhance employee satisfaction and organizational performance.

5. Improve Employee Experience:

   • Evaluate employee engagement, satisfaction, and workplace culture.
   • Suggest strategies to foster a positive work environment.

6. Strategic Alignment:

   • Ensure HR functions align with the organization’s mission, vision, and long-term objectives.
   • Reinforce the role of HR as a strategic business partner.

7. Facilitate Continuous Improvement:

   • Establish a benchmark for HR practices to track progress over time.
   • Foster a culture of learning and development within the HR function.

Q5. A) What is human capital? List and explain the various issues in the measurement and reporting of human capital.                (08)

Human Capital refers to the intangible value embedded in the knowledge, skills, abilities, experience, and health of an organization's workforce. It represents the economic value that employees bring to the organization through their productivity, innovation, and expertise.

Issues in the Measurement and Reporting of Human Capital:

1. Intangibility:

   • Human capital lacks physical form, making it difficult to quantify or assign precise monetary values.
   • Challenges arise in identifying which elements of human capital should be measured.

2. Standardization:

   • There is no universally accepted framework for measuring or reporting human capital.
   • Metrics often vary across industries, regions, and organizations, limiting comparability.

3. Attribution:

   • Separating the impact of human capital from other organizational assets (e.g., technology, processes) is complex.
   • Determining the direct contribution of human capital to organizational performance is challenging.

4. Subjectivity:

   • Many aspects of human capital, such as leadership quality or creativity, are qualitative and subject to interpretation.
   • Assessment tools often involve biases, leading to inconsistencies in reporting.

5. Dynamic Nature:

   • Human capital is not static; it evolves with training, experience, and changing organizational needs.
   • Continuous updates are required, making consistent measurement difficult.

6. Valuation Techniques:

   • Methods such as cost-based (training expenses, recruitment costs) or income-based (expected future earnings) approaches have limitations.
   • They may fail to capture the intrinsic or strategic value of human resources.

7. Integration with Financial Reporting:

   • Traditional accounting systems do not recognize human capital as an asset in financial statements.
   • This exclusion can understate the organization's actual value and hinder strategic planning.

8. Privacy and Ethics:

   • Collecting and reporting detailed data on employees may raise concerns about privacy and consent.
   • Balancing transparency with confidentiality is a significant challenge.

9. Impact of External Factors:

   • External influences such as economic conditions, labor market trends, and regulatory requirements affect human capital but are not always accounted for in measurement.

10. Lack of Awareness:

    • Many organizations underappreciate the value of human capital, resulting in inadequate focus on its measurement and reporting.

OR

Q5. Write short note on (any three)                (15)

a) Pre-employment requirements

Pre-employment Requirements refer to the set of conditions, checks, and documents that a candidate must fulfill or provide before officially joining an organization. These requirements ensure that the candidate is qualified, trustworthy, and compliant with the organization's hiring policies and legal standards.

Common Pre-employment Requirements:

1. Verification Checks:

   • Background Checks: Includes criminal record verification, reference checks, and employment history validation.
   • Education Verification: Confirms academic credentials and qualifications.

2. Medical Examination:

   • Ensures the candidate meets the physical and mental health standards required for the job.
   • May include drug and alcohol testing, depending on the role.

3. Identity Proof and Documentation:

   • Submission of valid identification documents such as passports, social security numbers, or national IDs.
   • Work authorization or visa verification for international candidates.

4. Skill or Aptitude Tests:

   • Job-specific assessments to evaluate the candidate’s technical or soft skills.
   • Includes psychometric or personality testing in some roles.

5. Employment Agreements:

   • Signing of offer letters, employment contracts, and acknowledgment of company policies such as confidentiality agreements.

6. Compliance with Legal and Company Policies:

   • Submission of tax forms (e.g., W-4 in the U.S.) and other required declarations.
   • Adherence to non-disclosure agreements (NDAs) or conflict-of-interest policies if applicable.

Importance:

• Ensures Fit: Confirms that the candidate meets job and organizational requirements.
• Risk Mitigation: Protects the organization from potential fraud, legal issues, or workplace hazards.
• Establishes Trust: Sets a foundation for a transparent and professional relationship between the employer and employee.

b) Non-monetary method valuation of human resources

Non monetary methods of valuing human resources measure the worth of employees in terms that do not involve money. Instead of calculating a financial value, these methods focus on qualitative and behavioral aspects such as skills, potential, contribution and importance to the organization. In HR studies, especially in BMS, the main non monetary methods include:

1. Skills inventory

This method evaluates employees based on their qualifications, experience, technical skills, leadership ability and professional achievements. Organizations maintain detailed records of each employee’s capabilities. This helps in planning promotions, job rotation, succession and training.

2. Performance appraisal

Employees are assessed based on how well they perform their job roles. Appraisal systems look at factors like productivity, problem solving ability, teamwork, decision making and attitude. This gives a non monetary measure of how valuable an employee is to the organization.

3. Assessment of potential

This method evaluates the employee’s future value to the organization. It focuses on leadership potential, learning ability and ability to take higher responsibility. It is often used for identifying future managers and planning succession.

4. Attitude and behavior analysis

Here employees are evaluated based on workplace behavior, discipline, cooperation, communication skills and commitment. These behavioral factors contribute to the overall organizational culture and are important indicators of human value.

5. Job analysis and role evaluation

The value of an employee is linked to the importance of their role in the organization. Jobs that are critical to success or require high skill carry more human value. This method helps understand which roles are more crucial from an HR perspective.

6. Employee satisfaction and morale analysis

Surveys, interviews and feedback systems are used to judge how motivated and satisfied employees are. Higher satisfaction usually leads to better performance and lower turnover, which increases the value of human resources.

7. Human resource accounting ratios (non monetary form)

Some organizations use ratios that show the condition of their workforce, such as:

• Absenteeism rate

• Turnover rate

• Training participation rate

• Internal promotion rate

These indicators show the health of the workforce in a non financial way.

8. Benchmarking and comparison

Employee performance, skills and behavior can be compared with industry standards or competitor organizations. This helps understand where the organization stands in terms of human capability.

c) Role of HR Auditor

The role of an HR auditor is to examine how well the HR function of an organization is operating and to provide independent feedback for improvement. As explained in BMS studies, the HR auditor takes a professional and systematic approach to evaluating policies, procedures and practices. The main roles are:

1. Review HR policies and systems

The auditor checks whether HR policies related to recruitment, training, performance appraisal, compensation, promotion, employee welfare and discipline are clear, updated and relevant. The aim is to see whether they support organizational goals and legal standards.

2. Check legal compliance

A major role is to verify that the organization is following applicable labor laws and government regulations. This includes statutory requirements related to wages, working conditions, leaves, safety, benefits and equal employment opportunities. The auditor identifies legal risks before they turn into penalties or disputes.

3. Evaluate implementation of HR procedures

The auditor not only checks the existence of policies but also whether they are being implemented correctly. For example, if a performance appraisal system exists, the auditor verifies whether managers are actually conducting appraisals on time and documenting results properly.

4. Identify strengths and weaknesses

The auditor highlights what the HR department is doing well and where improvements are needed. This helps management understand gaps in performance, efficiency and consistency.

5. Analyze HR records and documentation

Proper documentation is critical in HR. The auditor checks whether employee files, attendance, payroll, appraisal records, training logs and statutory documents are accurate, complete and organized.

6. Evaluate HR performance and effectiveness

The auditor measures how well HR activities are helping the organization. This may include reviewing:

• Employee turnover

• Absenteeism

• Hiring timelines

• Training results

• Grievance handling

This shows whether HR is supporting productivity and smooth operations.

7. Review employee satisfaction and work environment

The auditor may conduct surveys, interviews or feedback sessions to assess employee morale, communication quality, fairness in HR processes and general workplace culture. This helps understand how employees feel about the organization.

8. Maintain objectivity and neutrality

The HR auditor acts as an independent observer. Their role is not to favor management or employees but to give unbiased assessment based on facts and evidence.

9. Recommend improvements and action plans

After evaluation, the auditor prepares a report suggesting what should be improved, changed or updated. The recommendations help HR and management make better decisions for the future.

10. Support continuous improvement

The role of the HR auditor is not only to judge the present situation but also to help create systems that improve over time. Regular audits ensure HR remains efficient, lawful and aligned with organizational goals.

d) Disclosure at International level

Disclosure at the international level refers to presenting human resource related information in a transparent and standardized format so that organizations across different countries can be compared easily. Since employees are major contributors to an organization’s performance, many global bodies encourage companies to report not only financial information but also details about human assets.

1. Purpose of international disclosure

The main aim is to make HR reporting more uniform and globally understandable. Different countries use different accounting systems, and this makes comparison difficult. International disclosure seeks to:

• Improve transparency

• Make companies accountable for their workforce policies

• Help investors, regulators and other stakeholders understand how organizations manage their employees

It ensures that organizations report HR information in a way that can be compared across borders.

2. Need for international standards

Without common standards, every company reports HR information in its own style. This affects:

• Reliability

• Comparability

• Quality of information

Having common norms helps create a level playing field. Stakeholders can understand performance, HR strength, employee development and workplace practices regardless of which country a company operates in.

3. Role of international institutions

Several global bodies play an important role in promoting HR disclosure norms:

IASB (International Accounting Standards Board)

Works toward common accounting standards and encourages proper disclosure of non financial information including human resources.

IFAC (International Federation of Accountants)

Supports guidelines that promote accountability, ethical practices and transparency in reporting.

ILO (International Labour Organization)

Focuses on employee welfare, workplace safety, fair labor standards and equality. Many of its guidelines influence HR reporting globally.

These organizations set frameworks, encourage improved reporting and motivate companies to present HR information responsibly.

4. What companies disclose at the international level

Organizations are encouraged to provide detailed HR information such as:

Employee profile

• Number of employees

• Age, skill level and distribution

• Qualifications and experience

Training and development

• Hours of training per employee

• Investment in skill development

• Types of training programs

Workplace conditions

• Health and safety measures

• Accidents and injury reports

• Employee welfare schemes

HR systems and policies

• Performance appraisal

• Promotion and succession planning

• Wage and compensation systems

HR performance indicators

Companies may report indicators such as:

• Employee turnover

• Absenteeism

• Employee engagement levels

• Internal promotion rates

These give stakeholders a picture of organizational health and HR capability.

5. Non financial reporting formats

HR information is commonly disclosed through:

Sustainability reports

Highlight economic, environmental and social performance including human resource matters.

CSR reports

Show the company’s commitment to fair practices, employee welfare, training and community development.

Integrated annual reports

Combine financial and non financial information to show overall organizational performance.

Social audits

Focus on the social impact of the company’s policies and how employees are treated.

These documents allow stakeholders to understand the human side of business, not just numbers.

6. Benefits of disclosure at the international level

Better comparison

Investors and analysts can compare organizations from different countries on:

• Human capital quality

• Employee policies

• Level of commitment toward workforce development

Improved credibility

Transparent reporting builds trust with:

• Investors

• Regulators

• Employees

• Society

Attracting global talent

Organizations that disclose HR information well appear more professional and employee friendly, helping them attract better talent.

Benchmarking

Companies can compare their HR performance with multinational organizations and improve their policies.

7. Increased accountability

International disclosure forces organizations to be responsible and fair in their HR practices. It promotes:

• Ethical treatment of employees

• Diversity and inclusion

• Equal opportunities

• Safe working environments

Companies must “prove what they practice” instead of making vague claims.

8. Challenges in international disclosure

Although useful, it also faces some problems:

• No universal mandatory HR reporting system

• Difficulty in measuring human value in numbers

• Many organizations are not ready for full transparency

• Cultural and legal differences across countries

Even with these challenges, the trend toward more detailed and standardized reporting is increasing.

e) Capitalization of Salary

Salary capitalization, also known as labor capitalization, is an accounting method where a portion of an employee's salary and related expenses are recorded as an asset on the balance sheet instead of being expensed on the income statement in the period they are incurred. This practice is typically applied when an employee's work directly contributes to the creation of a long-term asset, such as software development, building construction, or research and development projects.

In essence, the rationale behind salary capitalization is that the employee's efforts are creating future economic benefits for the company. Therefore, it's more appropriate to allocate the cost of their labor to the asset being created rather than immediately expensing it.

Advantages of Salary Capitalization

Capitalizing salary can offer several potential advantages for companies:

• Improved Matching Principle: It aligns the expense of labor with the revenue generated by the asset created. This provides a more accurate representation of the company's profitability over the asset's useful life.
• Enhanced Financial Ratios: Capitalizing salary can improve key financial ratios, such as the return on assets (ROA) and the profit margin. This is because the expense is deferred, leading to higher reported profits in the short term.
• Tax Benefits: In some jurisdictions, capitalizing salary may result in tax benefits. The capitalized costs can be depreciated over the asset's useful life, providing a tax deduction over time.
• More Accurate Asset Valuation: It provides a more accurate representation of the true cost of an asset. This is particularly important for assets that are internally developed, as it captures the labor costs associated with their creation.
• Attractiveness to Investors: Showing a higher profit margin can make the company more attractive to investors.

Disadvantages of Salary Capitalization

Despite the potential benefits, salary capitalization also has several disadvantages:

• Increased Complexity: It adds complexity to the accounting process. Companies need to implement robust time tracking and cost allocation systems to ensure accurate capitalization.
• Subjectivity: Determining the portion of salary to be capitalized can be subjective, especially when employees work on multiple projects. This can lead to inconsistencies and potential manipulation.
• Potential for Overstatement of Assets: If not done carefully, salary capitalization can lead to an overstatement of assets on the balance sheet. This can mislead investors and creditors about the company's financial health.
• Reduced Current Profitability: While it improves long-term profitability, it reduces current profitability. This may be a concern for companies that are focused on short-term results.
• Compliance Costs: Implementing and maintaining a salary capitalization system can be costly, especially for small businesses.
• Risk of Write-Downs: If the asset being created does not generate the expected economic benefits, the capitalized costs may need to be written down, resulting in a significant loss.

Elective: Operation Research (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2022	November	Download	Solution
2023	April	Download	Solution
2023	November	Download	Solution
2024	April	Download	Solution
2024	November		Solution
2025	April

Elective: International Finance (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2022	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: Brand Management (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April		Solution

Elective: HRM in Global Perspective (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: Innovation Financial Service (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April		Solution

Elective: Retail Management (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download
2025	April

Elective: Organizational Development (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: Project Management (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: International Marketing (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download
2025	April

Elective: HRM in Service Sector Management (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download
2025	April

Elective: Strategic Financial Management (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: Media Planning (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: Workforce Diversity (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download
2025	April

Elective: Financing Rural Development (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download
2025	April

Elective: Sport Marketing (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download
2025	April

Elective: HRM Accounting & Audit (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: Indirect Tax (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: Marketing of Non-Profit Organization (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April

Elective: Indian Ethos in Management (CBCGS)
Year	Month	Q.P.	Link
IMP Q.			Solution
Obj. Q			Solution
2019	April	Download	Solution
2019	November	Download	Solution
2023	April	Download	Solution
2024	April	Download	Solution
2024	November	Download	Solution
2025	April