Equity audits are primarily used to ensure that an organizations owners have equitable access to resources, capabilities and rewards. It is a process of assessing the distribution of resources, capabilities and rewards within a company or other organization. The purpose of an equity audit is to help identify any potential areas of inequality that might be undermining the organizations performance, or creating an environment of unfairness and inequity.
Equity audits can be conducted both internally, by the organizations own management, or externally, by an independent auditor. In either case, the audit will involve thoroughly evaluating a range of factors, such as ownership structure, recruiting and hiring practices, compensation structures, performance management, and work/life balance.
A comprehensive equity audit will review both financial and non-financial aspects of the organizations operations. The financial aspects of the audit will include evaluating the organizations current financial structure, such as its capital structure and its ownership composition. It will also examine such matters as pay cycles, deferred pay, overtime pay and other financial matters. Furthermore, the audit will look at any recent investments made by the organization, and review its strategy with regard to its portfolio of investments.
The non-financial aspects of an equity audit will be much more wide-ranging, and will cover a variety of areas. These will likely include a review of the employers recruitment and selection practices and policies. The audit will assess the fairness and equity of the organizations procedures for disciplinary actions and terminations. Additionally, it will look at how the organization deals with culture issues, such as diversity and inclusion.
Other non-financial topics that might be covered by the audit include the organizations performance management systems, rewards and incentives structures, and leadership development pathways. The audit might also include two or more surveys designed to measure how well the organization succeeds in creating a work environment that is both equitable and rewarding.
In its most complete form, an equity audit will also involve an evaluation of how well the organizations policies and practices comply with relevant state, national and international laws and regulations.
Ultimately, the purpose of an equity audit is not only to identify and rectify any inequities that might exist, but also to make sure that the organization is taking steps to ensure the fair and equitable treatment of its staff and the equitable access of its owners to resources, capabilities and rewards.
