Population & Society

Uncovering Audit Deception: Countering Hidden Social Compliance Violations

Thursday, March 10, 2022

As social compliance audits have become more common in workplaces, so too has audit deception, when companies or individuals aim to conceal labor rights violations from auditors. Sophie Broach, an investigations analyst at the global workers’ rights advocate Transparentem, writes about the nonprofit organization’s investigations into forced labor, child labor and other human rights abuses in economies in Asia, including India, Malaysia and Myanmar, which revealed the seriousness and prevalence of audit deception. In a report published in October 2021, Transparentem offered recommendations for how to reform the social auditing industry.

Uncovering Audit Deception: Countering Hidden Social Compliance Violations

Silk rug factory in Xinjiang, China: Social compliance audits in some regions may be considered unreliable due to persistent auditor harassment and extensive surveillance (Credit: Dmitry P)

When auditors arrived to inspect labor conditions at the Indian spinning mill where 14-year-old Tharika (a pseudonym) worked, she was hidden from view, locked in a room with other teenage workers. Tharika said she was released after the auditors had completed their inspection. “They let us out only after they leave,” she said. Tharika worked overtime and night shifts at the mill, which were unlawful for someone so young. She said supervisors would wake her at night, in the dorm where she lived near the factory, demanding that she come to work. Tharika’s mill was part of a manufacturing group that supplied yarn and textiles to major American brands. These brands likely relied on auditors to assess labor conditions at the mill. But Tharika never got to speak to the auditors. 

Tharika witnessed audit deception, which occurs when companies or individuals attempt to conceal labor rights violations from social auditors. Audit deception is a problem throughout apparel supply chains, according to investigations by our organization, the US nonprofit Transparentem. Our investigations into forced labor, child labor and other human rights abuses have repeatedly uncovered alleged audit deception. In October, Transparentem released a report to call attention to the problem. 

Our findings expose the urgent need to reform the multi-billion-dollar social auditing industry, which brands rely on to detect human rights abuses in their global supply chains. Without such reform, companies run the risk of spending vast sums on audits that are ineffective – and workers will continue to endure abuses that go undetected.

Companies – both buyers and suppliers – face increasing regulatory pressure to assess human rights risks linked to their operations. Recent or pending legislation in the United Kingdom, France and the European Union mandate reporting on labor conditions in supply chains. A US law passed in December establishes a presumption that goods from the Xinjiang region of China are made with forced labor. The law places the onus on importers to prove otherwise. US Customs and Border Protection (CBP) has also increased efforts to block imports of items made with forced labor. In 2021, CBP detained nearly US$500 million worth of goods produced through forced labor – more than eight times the amount it detained in 2020.

Companies clearly need to understand labor conditions in their supply chains, but social audits can provide false assurances. Where deception occurs, audits mask abuses instead of revealing them. And suppliers have a strong financial incentive to deceive auditors, since failing audits can jeopardize lucrative business relationships. 

Several factors leave social auditing vulnerable to deception and manipulation. First, audits offer only a snapshot of conditions when auditors are present. Second, when auditors suspect they are being misled, they have limited power to challenge and investigate potentially false claims. Third, conflicts of interest are common. For example, auditors are often paid by the factories that they audit. 

Furthermore, social auditors and the brands that hire them seldom encounter legal consequences for reporting inaccurate results. And a lack of transparency around audit results, which is the industry norm, prevents inaccuracies from coming to light. 

Perhaps unsurprisingly, other recent research reveals the prevalence of audit deception. A 2021 study by Professor Sarosh Kuruvilla, a labor relations expert at Cornell University, found that out of more than 40,000 factory audits in 12 countries, 45 percent were based on unreliable or falsified information.

Keeping them honest: To protect workers' privacy and security, social compliance auditors have adopted technology such as mobile applications (Credit: @UNUMACAU on Twitter)

Keeping them honest: To protect workers' privacy and security, social compliance auditors have adopted technology such as mobile applications (Credit: @UNUMACAU on Twitter)

Transparentem’s projects provide rare, firsthand insights from workers into how audit deception can happen. Since 2016, we have uncovered evidence of audit deception across nearly 20 garment factories and spinning mills in India, Malaysia, and Myanmar. Common tactics include coaching workers to lie, falsifying documents such as pay slips, and hiding workers who are unlawfully employed (including young workers compelled to work excessive hours like Tharika). Workers’ accounts reveal that many types of abuses can be hidden from auditors, including passport withholding, prohibited recruitment fees, wage and hour violations, and hazardous working conditions. (Transparentem contacted the investigated factories and manufacturing groups with requests for comment following these investigations, and several denied Transparentem’s findings of audit deception).

In particular, workers’ accounts suggest that auditors often fail to detect illegal exploitation of adolescent workers. At almost every worksite that Transparentem investigated in India and Myanmar, those interviewed said young workers were ordered to hide during audits, including in dormitories, bathrooms, a warehouse, and a factory cellar. According to workers, employers and recruiters at some factories also coached workers to lie about their ages, falsified workers’ dates of birth on identity documents, and created fake medical records that misrepresented workers’ ages. 

Our investigations have found that, in addition to employers, recruitment agents who link workers to jobs can hide abusive practices. While not targeting auditors directly, this deception may later prevent auditors from uncovering problems. In particular, due to recently increased scrutiny of recruitment abuses and the proliferation of policies prohibiting worker-borne fees, recruitment agents have incentives to conceal instances when workers have paid for their jobs. For example, in two of our investigations in Malaysia, migrant workers said their agents gave them inaccurate receipts for their recruitment fees and coerced them to make videotaped statements in which they falsely said they had not paid for their jobs.    

Further complicating the problem, workers themselves are often given incentives to hide problems from auditors. Some workers told Transparentem investigators that they feared brands would cancel orders or break off relationships with their employers if they did not help conceal violations. These workers said they lied to auditors to protect their jobs. As one worker in Myanmar explained, “If the factory fails the audit, they won’t get orders, so the workers lie for that.” Factories can lose brands’ business if they fail audits, which can hurt the very workers that audits are meant to protect.

At their best, social audits can enable workers to bring serious issues to the attention of brands that can ensure that suppliers improve workplace conditions. But as our investigations demonstrate, the current system of social auditing is failing workers. Changes are urgently needed.  

First, Transparentem recommends increasing worker involvement in the audit process. Auditors should gather information directly from workers in an environment free from interference by management. If auditors do not speak a worker’s native language, they should engage independent translators. Auditors should also interview a wide sample of workers that accurately represents a factory’s workforce. And brands should ensure that their audits employ techniques that can help prevent deception, including strategic use of unannounced audits. In certain political contexts, however, accurate social auditing may be impossible, regardless of the methods used. For example, as the US State Department has advised, audits in Xinjiang are likely to be unreliable due to harassment of auditors and extensive surveillance, which can prevent workers from speaking freely about labor abuses they have experienced. 

We also call for enhanced transparency around audits. Brands should publish audit reports, corrective action plans, and remediation progress reports. Currently, these documents are not available to workers, worker organizations, and others who have the firsthand knowledge to confirm or dispute findings and hold companies accountable for improvement. Regulators may soon be empowered to act if companies do not. This February, a bill was introduced in the US Senate to compel companies making over US$500 million annually to publicly disclose their audits as they relate to forced labor.

But improving audit processes alone will never be enough to protect workers. Many brands devote disproportionate resources to auditing and certification programs, at the expense of more substantive efforts to improve labor conditions. 

Garment workers in Phnom Penh, Cambodia: As social compliance audits have become more common, so too has audit deception (Credit: Piotr Zaporowski)

Brands should support worker organizing, for example, by incorporating a strong freedom of association commitment in their codes of conduct and insisting, as a condition of doing business, that suppliers inform employees of their right to organize. Such measures by brands are particularly important in countries where anti-union repression is widespread. In unionized workplaces, workers are better able to advocate for their rights and solve workplace problems. 

Organizing is a more effective solution when workers are aware of their rights. Third-party-administered rights training programs help promote such awareness, so that workers understand the wages they should be paid, legal working hours, prohibitions on recruitment fees, and other key rights. 

Brands should also set up third-party grievance mechanisms so that workers can report problems on an ongoing basis. These grievance mechanisms must be safe, accessible, free, confidential, and in languages workers can understand. 

Most crucially, brands should ensure that they do not inadvertently promote labor abuse within their own supply chains. To protect workers, brands need to assess how their purchasing practices potentially contribute to labor violations. They should also develop long-term relationships with suppliers. Good audits find problems. But if brands immediately cut off relationships with suppliers when audits reveal problems, rather than working with suppliers to address their root causes, then even good audits may hurt the most vulnerable. 

Audits alone cannot prevent the abuse of workers like Tharika. When deception distorts audit findings, audits can put vulnerable workers at even greater risk by giving brands the false impression that workers’ rights are being protected. Brands must do more than auditing to promote labor rights in their supply chains. They can start by adopting our recommendations, which, if implemented, will help workers advocate for their rights.

Opinions expressed in articles published by AsiaGlobal Online reflect only those of the authors and do not necessarily represent the views of AsiaGlobal Online or the Asia Global Institute


Sophie Broach

Sophie Broach


Sophie Broach is an investigations analyst at Transparentem, the New York-based global nonprofit workers’ rights advocate, where she plans and coordinates investigations, analyzes data, conducts research, and writes reports on labor and environmental violations in global supply chains. Prior to joining Transparentem, she worked as a research analyst at Verité, where she helped produce reports documenting labor conditions in the sugar, gold and palm oil industries in Latin America. She also oversaw a network of international labor researchers under Verité’s Emerging Markets Research Program for institutional investors, which evaluated labor-standards compliance in 25 countries. Previously, she served as an analyst at the US Government Accountability Office and as an associate technical advisor at a global health NGO in the Lao PDR, where she helped manage reproductive health and nutrition programs. She holds a BA from Yale University and an MA from Yale’s Jackson Institute for Global Affairs.

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