What Is a Corporate Social Responsibility Audit?

Malcolm Tatum

A corporate social responsibility audit is a type of evaluation regarding how well a business entity is managing its commitment to engage in business activities that are considered to be ethical and responsible as they relate to the communities in which the company resides and sells its goods and services. Considered part of a broader process known as social accounting, the corporate social responsibility audit will look closely at the day-to-day operational procedures used by the business, the impact of the operation on the local environment, and even how the finished products of the company are packaged to eliminate the accumulation of waste products in landfills. This type of audit will also look at how the business participates in the life of the local community, utilizing its resources to help maintain an equitable standard of living.

Financial audits are mandated by state & federal regulatory agencies.
Financial audits are mandated by state & federal regulatory agencies.

One of the key areas of consideration with a corporate social responsibility audit is the basic operation of the company itself. This often begins with assessments of the raw materials used in the production process, the strategies used to eliminate waste during the production cycle, and even what is done with that waste at the end of the cycle. Often, the process will extend to considering how the company manages its accounting records, calculates and pays taxes to the appropriate agencies, and in general fills the role of a good corporate citizen.

Part of the corporate social responsibility audit will also focus on how well the business is complying with any governmental regulations that apply to the industry in which the business operates. When and as any issues are identified, recommendations are made that help to bring the company back into compliance, hopefully before the issues lead to the assessment of fines and penalties. It is not unusual for a company to form a corporate auditing team that manages this function, or possibly to hire an outside auditing team to evaluate compliance with regulations and aid in the process of deciding how to bring the company back into compliance.

Another component of the corporate social responsibility audit will have to do with the stated goals of the company in terms of interacting with the community at large. For example, if the company sponsors programs that are geared toward improving school conditions, supporting local activities and in general making efforts to increase the standard of living for both employees and others living locally, this can be seen as a sign of social responsibility and commitment. While efforts of this type must be kept in balance with general operations and the need to keep the company profitable, this type of community involvement will often help to increase the visibility and reputation of the business, ultimately providing motivation for consumers to purchase the goods and services produced in greater numbers.

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