This document provides an overview of a management audit assignment submitted by a student. It defines management audit as an independent evaluation of a company's overall performance to assess efficiency and identify areas for improvement. The document outlines the objectives, scope, qualifications of auditors, techniques used, and components of a management audit report. It also compares management audits to financial audits.

1. ADVANCED AUDITING ASSIGNMENT
SUBMITTED BY :-
PRASHANTU MER
M.COM IV SEMESTER
ROLL NO. 99
TOPIC – MANAGEMENT
AUDIT

2.  CONTENTS
 MEANING AND DEFINITION
 OBJECTIVES
 SCOPE
 QUALIFICATION OF MANAGEMENT AUDITOR
 APPOINTMNET OF MANAGEMENT AUDITOR
 FINANCIAL AUDIT vs MANAGEMENT AUDIT
 TECHNIQUES OF MANAGEMENT AUDIT
 MANAGEMENT AUDIT REPORT

3.  MEANING AND DEFINITION
A management audit is an independent and systematic analysis and evaluation of a company’s
overall activities and performances. It is a valuable tool used to determine the efficiency, functions,
accomplishments and achievements of the company. The primary objective of the management
audit is to identify errors in management activities and suggest possible changes. It guides the
management to manage the operations most effectively and productively.
According to CIMA ( Chartered Institute of Management Accountants ) Management Audit is
defined as “An objective and independent appraisal of the effectiveness of managers and the
effectiveness of the corporate structure in the achievement of company objectives and policies. Its
aim is to identify existing and potential management weaknesses within an organization and to
recommend ways to rectify these weaknesses”
Management Audit is the systematic and dispassionate examination, analysis and appraisal of
management’s overall performance. It is a form of appraisal of the total performance of the
management by means of an objective and comprehensive examination of the organization
structure, its components such as department, its plans and policies, methods of process or
operation and controls, and its use of physical facilities and human resources.

4.  OBJECTIVES OF MANAGEMENT AUDIT
 To establish proper strategies – The management audit helps to assess the ability of management
to frame proper strategies and it also helps to ensure that collected data is sufficient for decision
making
 To give suggestions for improving efficiency – Management Audit helps to highlights the area of
inefficiency and helps manager to take steps to improve efficiency by offering valuable
suggestions.
 Helps to improve profitability – As the main aim of organization is to earn profit. Management
Audit helps to improve the efficiency of management and also helps to point out area of
improvement which in turn helps to improve profitability of organization.
 Helps to Co-Ordinate Activities - Management audit detects the interrelationship among the
activities, evaluates the authority and responsibility and gives valuable suggestions for
improvement of co- ordination among the activities and the employees.
 To help all the members of management to make discharge of their duties – Management Audit
clears the roles and responsibility of each members of management which helps in effective
discharge of their duties.

5.  SCOPE OF MANAGEMENT AUDIT
Management audit may cover a specific functional area or all the functional areas such
as. Sales, Inventory, Production, Purchase, Personnel, Finance, Administration, etc.
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.

6.  QUALIFICATION OF MANAGEMENT AUDITOR
 There is no official / prescribed qualification of management auditor as per law
 Generally CA
 Knowledge of accountancy, financial administration and management
 APPOINTMENT OF MANAGEMENT AUDITOR
Management audit is not compulsory under law. The shareholders or board of directors may
appoint the management auditor. No specific qualifications have been prescribed for the
management auditor. Generally chartered accountant are appointed as the management auditor.
The terms and conditions of appointment, the scope of audit work, the period to be covered, the
time frame of the submission of audit report and similar issues are settled through the letter of
appointment of the auditor. The management audit team has experts with expertise in different
fields of Management. Management audit team coordinates with the other levels of management
and runs a smooth audit process. It is a team of experts with full knowledge about management
science. Most of the team members have practical working experience of being a part of
management.

7.  MANAGEMENT AUDIT vs FINANCIAL AUDIT

8.  TECHNIQUES OF MANAGEMENT AUDIT
1. Accounting or Economic Techniques
a) Break Even Analysis
b) Discounted cash flows and Net present value methods
c) Cost benefits analysis
d) Standard costing and marginal costing
e) Quality analysis of company transaction
f) Activity based costing
2. Scientific Techniques
a) Computer Models : There are many types of problems which can be solved on computers
Eg. Decision on material mix, produce mix etc.
b) Network Analysis : To analyze the string of tasks to arrange them in sequential or parallel
order to complete the project in shortest possible time.

9.  TECHNIQUES OF MANAGEMENT AUDIT
3. Statistical Techniques
a) Activity Sampling : It is one of the many ways in which the present work loads can be
measured to obtain control executed by management
b) Exponential Smoothing
c) Interfirm Comparison
4. Personnel Techniques
a) Attitude Survey
b) Ergonomic
c) Training Standards
d) Profitability and productivity measurement

10.  MANAGEMENT AUDIT REPORT
A management audit is an assessment of how well an organization's management team
is applying its strategies and resources. A management audit evaluates whether
the management team is working in the interests of shareholders, employees, and the
company's reputation.