1. PART I Management Audit: Concept, Principles and Approaches
Shared by
Pratap Kumar Pathak

2. Welcome and Good Morning

3. Understanding Management Audit

4. Management Audit
“A comprehensive and constructive examination of an organizational structure of a company, institution or branch of government, or of any component thereof, such as a division or department and its use of human and physical facilities.” - William P. Leonard
“A systematic assessment of methods and policies of an organization’s management in the administration and the use of resources, tactical and strategic planning, and employee and organizational improvement.” - Business Dictionary

5. A result-oriented audit with strategic intent and capacity to provide the impetus for positive change.

6. Audit findings/judgments/ reforms
Management Audit
(Why of audit)
Audit Intention
Audit evidence/facts
(what is)
(How should be)
Audit capacity
Audit criteria/norms
(what should be)
Audit findings/judgments/ reforms
(Outputs/impacts)

7. Evolution of Management Audit System
Initiated as a management reform tool for increasing productivity and profitability in business entities
Practice of conducting independent assessment of organization and management capacity to achieve efficiency, economy and effectiveness: Policy, institution, resource, performance and delivery

8. Taylor’s Scientific Management: First Organized Initiation at 1909
Increasing efficiency and productivity through assessment of management process and driving improvement in management system.
Identification and solving management problems through intensive as well as scientific inquiry into job performance of workers.
Finding out ‘one best way of doing things’ in production process through time and motion study.
Build the capacity of management and workers to enhance efficiency through teamwork , performance management and production-based incentive system.

9. Basic Methods of Evaluating Policy and Management
Inspection
Measuring the process’s output against certain characteristics: form, fit, function
Binary outcome – good or bad
Compliance Audit
Implementation of policy, law, manuals, operating guidelines and instructions
Used in high-risk areas
Achieving stability and assurance
Management Audit
Focus on performance and results
Compliance audit with value addition of cause-effect assessment
Leads future improvements

10. Objectives of Management Audit
Assessment of compliance to policy and law and results of enforcement
Internal management control system to assure quality of performance and delivery
Effectiveness of organization and management reform process
Development of competency of human resource system
Improving investment decision system
Assessing market effectiveness of performance and delivery
Identification of risks and search for mitigating measures

11. Basic Features of Management Audit
Guided by strategic planning
Systematic, scientific and independent examination of management decisions and actions
Assessment of efficiency and effectiveness in conformity with performance standards
Examination of non-financial data
Challenges underlying rules, procedures and methods with focus on competitive efficiency and results

12. Focus on critical evaluation of management or project or programme or function as a whole rather that the appraisal of the behaviour and action of individual decision maker or employee.
Conducted by the independent expert or the team of experts from within or outside the organization but with autonomy, authority and professional competence

13. Basic Rules of Management Audit
Rule One: Focus on Serving Customers
Rule Two: Criteria-based measure of management performance
Rule Three: Audit should be evidence and fact-based
Rule Four: The results and conclusion of the audit should be made public
Rule Five: Use qualified and competent auditors
Rule Six: The audit should instill future improvements
Rule Seven: The audit should be participatory

14. Management Audit: Examination of Logical relationships
Relationship I : Policy – Organization and management – Performance – Result
Relationship II : Problem – Cause – Improvement
Relationship III: Measures for Reform – Implementation – Achievement of Reform
Relationship IV : Performance - Delivery - Customer/Market Satisfaction

15. Different Perspectives of Management Audit
Management Audit Perspective
Programme/Resource Efficiency
Policy and Strategy
Internal Management
Human resource
Market and Client
Stakeholders

16. Theoretical Frameworks of Management Audit

17. Key Principles of Management Audit
Compliance to policy and law
Strategic orientation
Assurance to standards and accountability
Performance improvement
Enhanced continuation and innovative/research-based reforms
Professional capacity with ethical and moral values
Focus on critical risk areas
Evidence-based

18. Management Audit Approaches
Performance and Delivery Auditing
Compliance Auditing
Results and Satisfaction Auditing

19. Models of Management Audit
Systemic and Operational Audit Model
Collaborative Model
Delegated or Decentralized Model
Virtual Auditing Model
Strategic Auditing Model
Outsourcing Model
Integrated and Fragmented Models
Mainstreaming Model

20. Evidence-based Approach
Focus on Sufficiency
Focus on Relevance
Objectively verifiable
Objective Means of verification
Research-orientation

21. Scope of Management Audit
Comprehensive audit
Thematic Audit
Project Management
Programme Management
Sectoral
Functional
Sub-function

22. Basic Requirements for an Effective Management Audit
Strategic Direction
Organizational Independence
Formal Mandate and authority
Unrestricted Access to Fields of Inquiry
Sufficient Funding and Resource Management Capacity
Competent Leadership and High Level of Willingness
Competent Staff with Motivation and Morale
Stakeholder’s Meaningful Support
Professional Audit Standards
Post-audit Follow-up Capability
External Scrutiny System

23. Thank You