MANAGEMENT ACCOUNTING

CIA 3

Chetan R. Bagri
1520410
5BBA-D
MANAGEMENT AUDIT
A measurement and report of the effectiveness and results of certain business procedures. Ma
nagement audits areusually performed internally, and check to see that procedures have their
intended effect. Unlike a compliance audit,which simply ensures that procedures are being fo
llowed, management audits challenge the assumptions and goals ofprocedures, with an eye to
ward improving efficiency. A management audit may recommend changes in procedure from
observed inefficiencies in existing procedures.

Objectives of Management Audit

1. To identify the weaknesses and inefficiencies of management in different functional areas,
such as production, sales, finance etc.
2. To analyses the different ways to overcome the inefficiencies, or weaknesses.
3. To critically review the organization structure.
4. To evaluate the ways for improving the management efficiency and to select the best are the
some of the objectives of management audit.

Scope of management audit

In management audit, experts from various fields
examine the organizational structure, Plans and Objectives, Policies, Systems and
Procedures, Methods of control, Standards fixed for performance and the method of
evaluation of results.
report on the defects, weaknesses and irregularities observed by them during their
examination.
make suggestions to improve the efficiency and performance of the management.

Advantages of management Audit

1. Management audit helps in decision making areas such as make or buy, closing down of an
unit, acquisition of a business, etc.
2. It also helps in assessing the efficiency of the executives. It serves as a moral check on the
executives.
3. Management audit suggests ways to utilize the resources of the organization effectively.
4. Management audit helps in rehabilitation of sick units.
5. Management audit report is jointly reported by experts &om various fields.
6. The opinions and suggestions of a group of experts on the functioning of the organization
are possible only through management audit.
Disadvantages of management audit
1. Management audit involves high cost and it is suitable only to big organizations.
2. Management audit may create a fear in the minds of the executives and may curb their
initiative and innovation.
3. The management auditor may lack independence and may simply take instructions from the
top management.
However, an organization can utilize management audit effectively to improve its various
functional areas