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Management Audit

In general terms, Management audit is audit of the management. It is a new concept in auditing which is beyond traditional audit which reviews all aspects of management. The primary objective of the management audit is to identify errors in management activities and suggest possible changes.
It guides the management to manage the operations most effectively and productively while detecting the problem and suggesting various means to avoid and solve them. Management Auditors advise the management on various matters related to performance of various departments as well as of the organization as a whole.

Process of the Management Audit

  • Identify the objectives
  • Break-down the objectives
  • Evaluation of the organization structure
  • Evaluation of the performance
  • Suggestions and Reviews

Why is it Important?

  • It is helpful in making plan, objectives and policies of the management to efficiently achieve the set objectives of the management by coordinating with the personnel.
  • It is helpful in preparation of budgets and optimum utilization of resources.
  • To help in co-ordination of various department to ensure most efficient internal organization.
  • It might reveal weaknesses among the members of the Board of Directors and also incompetence of managers.
  • It also helps in assessing lack of clear and identifiable management style in the organization.
  • To identify inadequacy of the management information system.
  • It helps all the five major functional areas like Purchase, Production, Sales, Personnel and Finance/Accounting to evaluate their performances
The point to note here is that it is not a statutory obligation to conduct management audit for any entity but it is an important tool for the continuous appraisal and evaluation of the methods and performance of an enterprise which will ultimately leads to increase in efficiency, achieving targets, and thus profit.