Auditor observes various aspects of organization in terms of physical facilities, meetings, discussions and other events related to organizational culture and training. This will reveal the work place atmosphere and organizational climate.
Observation consists of looking at a process or procedure being performed by others, e.g., the auditor’s observation of inventory counting by the company’s personnel or the performance of control activities. Observation can provide audit evidence about the performance of a process or procedure, but the evidence is limited to the point in time at which the observation takes place and also is limited by the fact that the act of being observed may affect how the process or procedure is performed.
The auditor observes a particular procedure being carried by the organization. Examples are observation of the internal control measures that are adopted in transactions involving cash, procedures followed on receipt or issue of material, etc. The auditor makes his observations to evaluate the efficiency and effectiveness of the system followed by the organization.
The auditors should physically visit the workplace including the plant, the machinery, the canteen, the toilets, the training rooms, the hostels, the hospital, school, living colony, etc. These visits and observations are meant to assess the extent to which a congenial and supportive human welfare oriented climate exists in the company. This is essential because employees are not likely to give their best if they do not live in good surroundings, their health and education are not taken care of, they do not have good communication and other facilities and their work conditions are poor. The observations can be conducted using a check list of questions.
