MANAGEMENT AUDIT RIO C. AGUILLON,CE MELISSA G. GEMINA

DEFINITION “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”

DEFINITION “Management audit is an investigation of business from highest level downward in order to ascertain whether sound management prevails throughout, thus facilitating the most effective relationship with the outside world and the most efficient organization and smooth running internally”

Objectives Business managed efficiently. Improvements and recommendations. Plans and programmes executed. Increasing managerial efficiency. Effective and efficient discharge of duties and responsibilities. Assess whether it can achieve the overall business objectives or not.

Scope 1.The present organizational structure is reviewed in relation to current and prospective demand of business and study must related to aims and objectives of enterprise. 2. It includes the study of present return on investor capital. Whether the return is adequate, fair of poor. 3.Management audit also requires the study of relationship of business with shareholders and investing public in general

Scope 4. The performance of the concern should be compared with that of the other firms in the same field. By comparing the different ratios we can get the comparative position of the business. 5. The aims, objectives, duties should also be kept in mind of the auditor. 6. Financial planning and control also is a part of the management audit. 7. The reviews of the production and sales function is also a important part of the management audit.

Types of information required for management audit Objectives Planning Organization Control Functional areas Monitoring and Evaluation Feedback Mechanisms

Functional areas Purchase Methods of purchase, quantities procured, problems on procurement and discount earned etc; Production Policy schedules of production, actual quantity produced at different levels, variances in production schedule, input- output ratios, ideal time etc;

Functional areas Distribution Organization of sales department, budgeted sales, actual performance, incentives offered for sales, promotional offers, effectiveness of distribution channels etc; Personnel Personnel policy, method of recruiting and training, cost of man power, promotion policy, appraisal policy, labor welfare activities.

Functional areas Finance and accounting Financial structure followed, sources of raising funds, effectiveness of raising finances, extent of working capital needs, financial controls followed, systems of accounting, effectiveness of cost control devices;

Management reporting “ A good business report is a communication that contains factual information, organized and presented in clear, correct and coherent language.” -Johnson and Savage.

Essentials of effective reporting Good form and content The report should be given proper title, headings, sub-headings and paragraph divisions. Simplicity The report should be presented in a simple, unambiguous and clear language. Promptness Promptness in submitting a report is an essential element of a good report. The reports should be sent at the earliest and should not be delayed.

Essentials of effective reporting Relevancy The reports should be presented only to the persons who need them. Sometimes the reports are sent to various departments and the secrecy will not be maintained and expenditure will be more. Consistency There should be a consistency in the preparation of reports. The comparability of reports will be possible only if they are consistent.

Essentials of effective reporting Accuracy The reports should be reasonably accurate. A report sometimes will be approximated but approximation should not be done up to the level where information loses its form and utility. Controllability The report should be addressed to appropriate persons in respective responsibility centres and its variance should be mentioned.

Essentials of effective reporting Cost Consideration The cost of preparing and presenting the report should also be considered and it should not exceed the advantage derived from such reports. Comparability This reporting system is meant to help management in taking correct decisions and improving operational efficiency of organization. This information helps in finding out deviations or variances.

Essentials of effective reporting Frequency of reports Along with promptness, the frequency of reporting is also significant. The timing of reporting will depend upon the nature of information and its purpose. These reports are prepared for appropriate persons.

MUCH THANKS…