Management Audit

Management Audit is an assessment of the competencies and an analysis and capabilities of a company’s management in carrying out corporate objectives.

It is an audit to examine, review and appraise the various policies and actions of the management on the basis of certain objective standards. It attempts to evaluate the performance of various management process and functions.

It is important to stress that the management audit asses the overall management of the company, not the performance of individual managers.

It is valuable tool to determine the functions, accomplishment, efficiency and achievements of the company. It is an independent and systematic analysis and evaluation of company overall activities and performance.

Objective of Management Audit:
1) Improve efficiency of the management.
2) Ensure optimum utilization of resources.
3) Point our Deficiencies.
4) Help management by providing early signals.
5) Evaluate plan and policies.
6) Anticipate problem and suggest remedies.
7) Increase Profit
8) Find out weak points in internal control system.

Scope of Management Audit:
A management Audit is vast as compared to financial review because it is not only evaluate finance but also other feature of the company.

• Suggest for improvement: The management audit suggest improvement in areas e.g. sale, human resource , finance , administration, purchase etc.
• Examine and Locate the Differences: It helps the identify the differences in productivity and if the pattern set by the company is not fulfilled.
• Executions of Policies and Principals: It reviews whether the principals and policies deployed by the company is effective and successful.
• Calculate the effectiveness of Management : It audits the entire level management of the company.

Advantages of  Management Audit:
1) It is helpful in making plan, objectives and policies of the management.
2) It is helpful to evaluate the performance of management.
3) It is helpful in resource management.
4) It is helpful in preparation of budgets of organisations.
5) To establish good relations with employees.
6) It is very helpful to create strong communication system with outsiders and within the various department.

It has Following Steps:

1. Identification of the objectives of the organisation. It is important that the objectives are clearly identified & perceived . Sometimes the objectives are stated in specific terms but in most cases they remain undefined.
2. The overall objectives of the organisation are to be broken up plans & detailed targets for various segments.
3. The organisational structure is to be reviewed to assess whether it can effectively the detailed targets & fulfil the overall objectives. If possible, specific responsibility centres may be identified in the organisation.
4. In many cases the performance can be expressed in quantitative terms. It should be compared with the objectives and targets. The performance of each functional area or responsibility centre is to be examined.
5. A motivation system is operated whereby incentives are given to various personnel on the basis of the results of the management audit. On the basis of the above examination, realistic course of action is to be suggested.