A Human Capital Audit Framework: Detecting Capability Impairment in Organizations and Economies

Despite sustained investment in education, skills development, and workforce expansion, many organizations and economies continue to experience stagnant productivity, declining engagement, and increasing execution risk. Traditional accounting, governance, and policy systems treat human capital primarily as a cost or labor input rather than as an economic asset subject to deterioration and misallocation. As a result, early-stage human capital impairment remains largely invisible until financial or institutional failure occurs. This paper proposes a conceptual Human Capital Audit Framework designed to identify capability deterioration before it manifests in economic outcomes. Drawing on interdisciplinary insights from human capital theory, organizational governance, labor economics, and emerging AI-era workforce dynamics, the framework identifies six recurring domains where human capital degradation originates: education-to-deployment misalignment, skill–credential signal failure, leadership judgment suppression, performance measurement distortion, AI substitution exposure, and measurement blindness in macroeconomic and accounting indicators. The paper reframes human capital as an auditable economic asset and introduces impairment logic analogous to intangible asset testing. The proposed framework offers a structured early-warning mechanism for organizations, regulators, and policymakers and establishes a foundation for future empirical research into human capital valuation and governance.