Management Audit Definition Objectives Examples

Management Audit Definition

Objectives of Management Audit

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#1 – Establishing Proper Strategies

The team must ensure the ability of the management whether it has proper strategies to obtain the required information for better decision making. Again the team also ensures that the collected data is sufficient to achieve the organization’s objectives without hassles. Usually, the strategies are the key to achieving the goals of any establishment.

#2 – Implementation of Required Internal Control

The audit team should verify the effectiveness of the organization’s Internal Control to overcome the management deficiencies. If the Implemented Internal Controls are not effective enough, it will lead to unnecessary problems in the process.

Example: In a reimbursement policy of a company, first, an accountant verifies the documents, and then the Senior AccountantSenior AccountantA senior accountant is responsible for reporting costs, expenditure, profitability, margins and performs the lead accounting role in the organization. Their duties are more than a junior accountant, which included data compilation, journal entries, and populating balance sheets.read more will review the same documents. Finally, the cashier pays the cash, ensuring a triple check on the transaction. Here the internal control is so strong that it avoids any manipulation of cash.

#3 – On-time Report Generation

The management Audit team should confirm whether the management placed proper control to generate and provide the reports on time.Report generation will be called an essential tool for the identification of errors. Sometimes it will alsoWhistleblower policy is a set of rules and guidelines that all corporate stakeholders, employees, contractors, shareholders, vendors, or anybody else must follow if they notice something illegal or unethical happening within the organization, whether intentionally or unintentionally.read more act as a whistleblowerAct As A WhistleblowerWhistleblower policy is a set of rules and guidelines that all corporate stakeholders, employees, contractors, shareholders, vendors, or anybody else must follow if they notice something illegal or unethical happening within the organization, whether intentionally or unintentionally.read more to control the greater mistakes during the process.Generally, the reports of the auditReports Of The AuditAn audit report is a document prepared by an external auditor at the end of the auditing process that consolidates all of his findings and observations about a company’s financial statements.read more should improve the efficiency of the management for the betterment regularly.

Management Audit Plan and Execution

The following are the steps for the planning and execution –

#1 – Appointment of Proper Personnel

In the audit process, a proper person should be appointed to execute the plan under a management audit. Proper in the sense that he must be professionally qualified, knowledgeable, and experienced to perform theAn audit plan refers to the design of an audit describing the overall audit strategy and guidelines to follow while performing the audit. read more audit planAudit PlanAn audit plan refers to the design of an audit describing the overall audit strategy and guidelines to follow while performing the audit. read more without ambiguities.

#2 – Drafting Audit Programme

Collection of required documentsAssessment of policies and proceduresMonitoring the StrategyInspection of Books and other supporting documentsInvestigate with available InformationInquiries with staff/teamObserving the internal controlTest check of the transactions and their resultsScientific method evaluation and review (If necessary)Preparing the reports with solutions

#3 – Training Programme

Proper training must be provided to the team before executing the audit.

Example: Management audits on Construction industries require specific evaluation skills and techniques, which must be provided before the execution.

#4 – Time Concern

Every plan of the audit programAudit ProgramAn audit program is a course of action that businesses undertake to comply with regulations.read more must be executed on a proper timeline to get the exact results of it.

Example: Observing the manufacturing process can identify normal and abnormal wastage, which should be executed during the process.

#5 – Frequencies of Audit

An audit should be conducted frequently to identify the mistakes occurring during the decision-making process.

Frequencies may be decided based on the nature of business and also to be considered with the duration of understanding of business and its transactions

#6 – Reports with Solutions

Usually, the audit report consists of errors that interrupt the management from making the proper decision.The team should provide their findings and the required solutions to overcome the issues.Every report should provide a detailed analysis of its repercussions in the future.

Example

M/s ICI information technology services face a lot of trouble finishing their projects on time. They incurred huge losses due to the delay in the management decisions and related processes. They have appointed an auditor recently to do an audit on the management and their decision-making process.

Based on the audit, the following are the findings:

No Proper internal control in the management to finalize the projects on time;No proper communication with clients to finalize the projects on time;No coordination between management and teams to complete projects.No proper report generation software for internal control;

The above findings are to be cleared out to get good feedback in the future.

Advantages

Proper Strategy Preparation and formation to achieve the objectives.Proper Placement of Internal ControlsInternal ControlsInternal control in accounting refers to the process by which a company implements various rules, policies, or procedures to ensure the accuracy of accounting and finance information, safeguard the various assets of the business, promote accountability in the business, and prevent the occurrence of frauds in the company.read more for effective decision making;Improvisation of the management decision-making process;To overcome the deficiencies of the management.Deployment of proper human resources.Rectification of Errors with the least cost or less damage;Avoid abnormal wastage of resources such as men, materials, money & machines.Timely results without delay.

Difficulties in Conducting Management Audit

Lack of Investments and Technology – Generally, the suggestions may involve high investments in 4M resources such as Men, Machinery, Material, or Money, which will be an issue for most organizations. Sometimes the classical process may require change with a technological update. Still, the organization’s management or staff may have trouble undergoing the new or required updates.Lack of Management support for the change – The organization’s management may have some trouble changing from their classical process to the latest one for many reasons.Staff Behaviour is a problem sometimes in executing the audit plan because they may resist providing the basic information for the audit at the time of discussions, interviews, or inquiries. They used to feel that their mistakes would come out during the audit process if they provided all the necessary details for the audit.Tackling top management is also an issue in certain situations where senior management will be against the audit process.

Conclusion

Audit report findings and recommendations should yield better results for the organization. The recommendations of the findings can be executed with a mutual understanding between the audit team and top management for the establishment’s success. In the same way, findings are also to be reported in better terms, which should avoid further conflicts by the management.

In the end, the audit’s success will be based on the participative and friendly approach rather than focusing only on harassing the staff or management for their mistakes.