Social accounting is a method of keeping track of money and other assets according to the cultural practices and values of a certain society. Social auditing, on the other hand, is a management tool that has been used for decades to evaluate how well an organization adheres to ethical standards. The two terms are often incorrectly used interchangeably, but they do have some distinct differences—though it might not be easy to distinguish them at first glance.
In this article we will explore their similarities and differences in order to help you better understand what social accounting really entails as opposed to social auditing.
What is the main difference between accounting and auditing?
The main difference between these two methods is that social accounting focuses on recording financial transactions while social auditing focuses more on factors such as governance or compliance with the law. In other words, social accounting deals with financial reporting related to social issues, while social auditing provides insights on how well management supervises and controls a company’s operations in order to be in accordance with specific standards or regulations.
In fact, when organizations became more conscious about their role in society, they began using forms of social auditing to ensure that they are not causing any damage or behaving in an unethical manner. Therefore, social auditing is mainly used as a management tool—but social accounting is primarily focused on reporting funds transactions relevant to society.
What is the social responsibility of accounting?
Let’s look at the main differences between these two methods of dealing with financial matters within the context of a company or organization. For example, let’s say that you work for Company X, which donates money to a local nonprofit organization whose goal is to support at-risk children. This transaction would be accounted for by social accounting practices since it is related to the company’s donations and contributions in order to help others less fortunate. On the other hand, if you worked for Company Y, which engaged in illegal activities—such as bribing government employees to win contracts, passing off sub-standard items as quality products or paying the police for protection—then this transaction would be accounted for by social auditing.
How is social accounting practiced?
Social accounting can be divided into three main areas: financial reporting, double entry bookkeeping, and community or social auditing. When dealing with financial matters related to society, organizations usually generate reports that allow stakeholders to assess the financial consequences of their actions.
Double-entry bookkeeping is another type of social accounting method used by organizations when keeping track of funds in order to produce financial statements. These statements are designed for specific stakeholders—such as investors, creditors and employees—and they provide a more complete picture of the company by including information about its financial transactions.
The last main practice related to social accounting is community or social auditing. This method allows organizations to explore issues such as transparency and accountability during the planning process in order to determine their positive or negative impact on society. This method is widely used in the public and not-for-profit sectors.
How is social responsibility measured?
Social auditing aims to assist managers in tackling three main issues: compliance, accountability, and transparency. If you think of a company such as Volkswagen that intentionally cheated on standard emissions test in order to improve its sales, this would fall under the category of transparency. But if you think of a company such as Coca-Cola that is committed to producing beverages in an environmentally friendly manner or follows ethical practices when doing business with other companies, then this would be an example of compliance and accountability.
What is the meaning of social accounting?
There are many examples of social accounting practice in today’s world, but here are some of the most influential. First, there is Fairtrade International (FLO). FLO was established to help producers in poor countries get higher prices for their products by certifying them with its label. The organization also monitors companies’ behaviour to make sure they adhere to ethical standards when doing business with producers.
Another example is the United Nations, which has been using social accounting since 1946. The UN conducts independent investigations of companies and produce reports on these issues—and its influence has led many governments around the world to consider adopting similar methods of auditing in order to encourage transparency and compliance. For instance, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires many US companies to disclose whether they use “conflict minerals” that originate from the Democratic Republic of Congo or adjoining countries.
Social Accounting is a method that allows organizations to address social issues with the intention of helping society, while Social Auditing is a tool used by management to determine how well an organization is following ethical practices. Social accounting can be practiced through three main areas: reporting, double-entry bookkeeping and community or social auditing. In contrast, social auditing aims to help managers with compliance, accountability and transparency issues—and it is widely used in the public and not-for-profit sectors.
What are corporate social audit techniques?
Some common corporate social audit techniques include hiring an outside auditor to conduct the social audit, inviting volunteer groups or community members to participate in audits, and creating feedback forms for participants to fill out. Audits are typically conducted annually, either before boards of directors meetings or shareholder’s meetings, but can also be used as part of a company’s quality improvement process. But there are actually 6 types of social audits that companies tend to use.
In recent years, companies have been focused on not only the means of production but also the benefits provided to society by their products and services. This has led to a flurry of quality social audits that help companies measure their performance against several factors such as environmental impact, community investment, and business ethics. These audits are used to ensure that a company adheres to the highest ethical and environmental standards.
Corporate social audits can help a firm understand where it stands with respect to its competitors, customers, employees, the governmental agencies that regulate it or other stakeholders in society. By participating in social audits companies not only ensure their survival but also enhance their reputation as socially responsible organizations. The ultimate
The history of the measurement of social responsibility accounting
The evolution of social accounting began in the 19th Century when an accounting profession was starting to be formed in Europe and America. At that time public authorities created official accounts of production, finance and business activities for both social control and planning operations. In the early 20th century, official account systems were used mainly by governments to monitor their own performance.
Informal systems also existed, such as the ‘social book-keeping’ of Catholics in France and Belgium, which were used to keep track of family wealth and expenses.
Social accounting was later influenced by the development of mass production and mass consumption that increased social awareness of role that economic activities played in society. In 1938, a reform in France introduced annual national accounts (with quarterly and monthly components) which covered the whole economy, not just the state. By the 1960s, social accounting had been established as a separate discipline of ‘social accounting and audit’ within business schools.
In the 1970s, new developments included attempts to provide social accounts for developing countries, environmental accounting and micro-costing of products by companies.
What is social accounting?
Social accounting is a field of study within a broader field known as social audits. Social auditing, in turn, can be seen to have three areas: accountability, informatics and participation. Accountability refers to the process, which is often a work in progress, by which an organization seeks to demonstrate that it has engaged in socially acceptable practices or sets standards for itself that are acceptable to society and an organization’s stakeholders. Informatics refers to the study of how information technology can be used to provide evidence about social accounting and audit issues and participation relates to methods whereby people affected by decisions within organizations, or seeking to influence them, can actively participate in decisions that affect their lives. Social auditing is a tool for bringing this knowledge together
The conclusion to how social responsibility is measured
The evolution of social accounting has led to greater transparency and accountability of organizations both to stakeholders and the wider society. The applications of social audits provide valuable information about business practices, not only within an organization but also for comparison with its competitors or other similar organizations. Social audits are also concerned with public participation which helps ensure that people can actively participate in decisions that affect their lives. Social audits can therefore contribute to greater accountability and transparency, leading to a more just and democratic society.
Caveats, disclaimers and corporate social responsibility
We have covered many topics in this article and want to be clear that any reference to, or mention of measurement, environmental performance, detailed data, particular interest groups, self reporting, government agencies, voluntary, resources, communities, techniques, such reports, informally produced, emphasis, legislation, appropriate measures, annual, procedures, waste impact, perception, only one element, countries, other bodies, internal use, narrower fields or reporting in the context of this article is purely for informational purposes and not to be misconstrued with investment advice or personal opinion. Thank you for reading, we hope that you found this article useful in your quest to understand ESG.