Management Audit Essentials to Learn and Conduct

Management Audit Essentials to Learn and Conduct

3 mins read444 Views Comment
clickHere
Syed Aquib Ur
Syed Aquib Ur Rahman
Senior Executive Content
Updated on Feb 1, 2024 16:58 IST

Management audit is the examination of all processes within the management department, including transactions, in a systematic and independent way. Let’s explore about management audit and what it exactly entails.

2022_12_Management-Audit.jpg

As you may already know, auditing in the finance domain refers to the unprejudiced inspection of all the financial transactions externally in an enterprise. Now, management audit is much broader in scope, and it is not just about looking into the past 12 months of processes like a financial audit. 

What Does Management Audit Mean?

Management audit means the assessment of performance across all levels of management along with policies, operations, existing structures, etc., in a firm. The primary goal is to improve the overall performance of the company by identifying errors and fixing them systematically. 

By errors in management, one means the inefficiency of processes or wastage of resources. 

Management audit is more related to controlling in management than the other functions of management.

Know the Meaning and Real Importance of Staffing in Management
Know the Meaning and Real Importance of Staffing in Management
Staffing in management is the process of finding the right employee who will benefit the organisation. It is more than finding one with technical capabilities that fit the job description....read more
Directing in Management – Meaning, Characteristics, Elements, and Principles
Directing in Management – Meaning, Characteristics, Elements, and Principles
What is directing in management? How does it differ from the other functions of management? Can an organisation survive without the directing function? Explore the answers to these questions in...read more
4 Types of Planning in Management that Every Manager Must Know
4 Types of Planning in Management that Every Manager Must Know
Knowing the different types of planning in management is pivotal for effective organisational growth. From operational to strategic, each planning type plays a unique role in steering businesses towards success....read more

Factors Considered in a Management Audit

As a management auditor, one has to ensure they gather information as scientifically as possible. William Patrick Leonard, in his 1962 book, The Management Audit: An Appraisal of Management Methods and Performance, discusses the seven factors that should be analysed. 

  1. Plans & Objectives 
  2. Organisational Structure 
  3. Policies and Practices
  4. Systems and Procedures
  5. Methods of Control
  6. Means of Operations
  7. Human and Physical Facilities

Scope of Management Audit

Now that you know the factors, let’s explore why they are considered by looking into the scope of management audit. Also note that there is no limitation to its scope. 

Assessing Efficiency of Management 

This is evaluated scientifically through all the levels of management, irrespective of responsibility and authority.  

Evaluating Plan and Policies Implementation

This is to evaluate if the plans and policies are executed correctly. While the management lays down the policies and have a solid plan, the employees may not follow them correctly.

Checking Relationship between Management and Staff

Management audit is not just about the evaluation of processes. It is also about the human side of things. An organisation may be understaffed with managers. What happens is that the subordinates may not get the best direction or guidance. They may not be motivated, too. The point is to assess whether the staff is comfortable working in the organisation. 

Span of Management – Explore its Meaning, Important Types and Common Factors
Span of Management – Explore its Meaning, Important Types and Common Factors
In business management practice, the span of management is also known as span of control, span of supervision, and span of authority. Find out the meaning, types, and factors that...read more
5 Popular Theories of Motivation that Management Experts Should Know
5 Popular Theories of Motivation that Management Experts Should Know
Motivation explains why some people in an organisation are more productive than others. The logic goes that the more one is motivated to work, the more the organisation benefits. That’s...read more
Guide to Maslow’s Hierarchy of Needs and Importance for Businesses
Guide to Maslow’s Hierarchy of Needs and Importance for Businesses
Maslow’s hierarchy of needs describes five different types of needs that motivate people, and they are all hierarchical in nature. This human behaviour is studied not only in the domain...read more

Assessing Returns

The management auditor looks into whether the returns are adequate for the company.

Looking For Variances

As mentioned earlier, a management audit is akin to the controlling side of things. The audit looks into the deviations (if any) from the plan and policies set by the management in the first place. 

Reason for Variances

After noting down the deviations, the management auditor looks into the reasons – taking once again a scientific/objective approach. 

Suggesting Improvements

Once everything is gathered, the auditor can provide suggestions that will increase efficiency in the organisation. 

 

3 Main Objectives of Management Audit

When it comes to management audit, the objectives are simple, and they are a simplified version of the scope, so to speak. 

  • Reviewing the organisation’s structure from a critically scientific perspective. 
  • Determining the inefficiencies in all functional areas of the organisation
  • Providing solutions for the challenges

By critically analysing the organisational structure, potential improvements and optimisations in processes can be identified. This may lead to a more streamlined hierarchy, improved communication channels, and better alignment with overall business objectives.

Identifying inefficiencies allows for targeted improvements in various departments. Addressing these inefficiencies can lead to optimised processes, reduced waste, and improved resource utilization, ultimately contributing to cost-effectiveness.

Offering solutions to identified challenges enhances the organisation's ability to overcome obstacles. This proactive approach can lead to improved decision-making, agility in adapting to changes, and better overall performance in the face of internal or external challenges.

Difference Between Accounting And Auditing
Difference Between Accounting And Auditing
The main difference between accounting and auditing is that accounting is the process of recording and summarizing financial transactions, while auditing is about verifying the accuracy and completeness of financial...read more
Difference Between Audit And Investigation
Difference Between Audit And Investigation
Learn about the fundamental difference between audit and investigation in detail in our blog. Explore how audits provide assurance on financial information, while investigations aim to gather evidence, establish facts,...read more

How Management Audit is Conducted

Gathering of Information

This is collected through questionnaires like surveys or in-depth questions. The aim is to understand the planning process of the organisation. 

Evaluation of Information

The information, once collected, must be investigated as objectively as possible. The purpose is to know the current state of the organisation. 

Verifying and Confirming Information

Information that is collected must be verified by whoever is providing it. Generally, verification is done through signatures. The management auditor also has to check whether the sources are validated. 

Taking Preventive Action

Once the information is confirmed, the management auditor must determine solutions for each challenge. After that, they can suggest the organisation with solutions that will have the best possible outcomes. 

Parting Thoughts

Management audit has a broad scope, as you can see now. The purpose is to ensure the organisation runs efficiently in all its processes. 

Learn more about such important concepts with management courses.

About the Author
author-image
Syed Aquib Ur Rahman
Senior Executive Content

Aquib is a seasoned wordsmith, having penned countless blogs for Indian and international brands. These days, he's all about digital marketing and core management subjects - not to mention his unwavering commitment ... Read Full Bio