This document provides an overview of management audits, including: 1. It defines management audit as a systematic examination and appraisal of management's overall performance, including examining organizational structure, plans, policies, operations, controls, facilities, and human resources. 2. The objectives of a management audit are to verify efficiency, suggest improvements to increase efficiency, assess effectiveness of planning and policies, and help increase profitability. 3. A management auditor must be a chartered accountant qualified under the Chartered Accountants Act of 1949 and cannot be employed by or indebted to the company being audited.

1. UNIT 4 CHAPTER 1 MANAGEMENT AUDIT
FOR M.COM 4
BY NEERU JASWAL

2. INDEX
• Meaning and Definition of Management Audit
• Need & objectives of Management Audit
• Scope of Management Audit.
• Advantages & Limitations of Management Audit
• Qualities and qualifications of Management Auditor.

3. LEARNING OUTCOME
• After this presentation students will be able to understand the concept of management
audit.
• What is the need of management audit.
• How it is conducted and what all areas are covered by it.
• Why it is important for the organization.
• Who is an management auditor.
• How he is appointed? What are the qualities and qualifications of management auditor?

4. INTRODUCTION
• Meaning:
Management Audit is the systematic 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.

5. DEFINITION
• “Management audit can be 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”. – CIMA
• According to L. R. Howard, "Management audit is an investigation of business
from the highest level downward in order to ascertain whether sound
management prevails throughout, thus facilitating the most effective relationship
with outside world and smooth running of internal organization."

6. SCOPE
• 1. Evaluate the Efficiency of the Management: Management· audit evaluates and appraises the efficiency of
the management at all levels.
• 2. Implementation of Principles and Policies of the Management: Management audit review whether
principles and policies formulated by the management have been successfully implemented or not.
• 3. Find Variances: It detects the variances in efficiency with the standards set by the management.
• 4. Analyze the Reasons for Variances: Management audit analyze the reasons for inefficiencies of the
management for not fulfilling the targets.
• 5. Recommend Suggestions for Improvement: It gives suggestions for improvement in the areas e.g.
production, sales, purchase, finance, human resources, administration etc.

7. OBJECTIVES:
• Verifying the Efficiency: Management audit aims at to assess the efficiency at all levels of management and implementation of policies.
• Gives Suggestion for Increase in Efficiency: Management audit highlights the inefficiencies in different areas of management and gives his
valuable suggestions and means to improve the efficiencies.
• Asses the Effectiveness of Planning and Policies: Management audit examine and evaluates the plans and policies and judge whether
planning and policies are properly implemented.
• Helps to Increase Profitability: Management audit helps the management to increase profitability by giving remedies to maximize the
organization's resources in an efficient way.
• 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.
• Gives Valuable Advice: By scanning the management efficiency and detecting the weak spots of different levels of management, the
management auditor gives valuable advice to the top management regarding different policies and future course of action.

8. ADVANTAGES:
• Evaluates Efficiency of the Management
• Scrutiny of the Plans, Policies and Procedure
• Helps for Correction of Plans, Policies and Procedure
• Aids for Decision Making
• Helps to Get Loan
• Helps to Get Subsidy
• Helps to Increase Profitability:

9. LIMITATIONS:
• The management audit is audit of the management, by the management, and for the management. The management auditors
are selected by the management itself. Such auditors may or may not be able to handle the job assigned to them.
• The management auditors are generally familiar with the organization and the staff and employees. The personal aspects
cannot be overlooked in such audits. Some may use this audit to level the score with someone while other may utilize it to
favour someone.
• They are more likely to take the facts for granted and may not probe into depth to investigate the matter any further.
• Time and cost constraints may limit the scope, operation and extent of such audits.
• The management audit team as selected by the management may not look, act and work as a team. Conflicting interests,
attitude and inclination may jeopardize the entire objective of the audit.

10. QUALIFICATION OF MANAGEMENT AUDITOR:-
• As per section 226 of companies act, a person should not be qualified for appointment
as an auditor of a public or private company unless he is a chartered accountant within
the meaning of the Chartered Accountant Act,1949.
• According to section 226(2), a person holding a certificate under Restricted Auditors
Certificate (Part – B states) Rules,1956, is also qualified to act as an auditor of a
company.
• However, the Central Government may grant, renew, suspend or cancel and make other
rules for such certificates by notification in the official Gazette

11. DISQUALIFICATION OF MANAGEMENT AUDITOR:-
• Following are the disqualification of a company auditor:-
• An auditor can not be a body corporate.
• An auditor can not be an employee of officer of the company.
• A person who is a partner or who is in the employment of an officer of the company, can not be the auditor of
the company.
• A person who is indebted to the company for an amount exceeding one thousand rupees, can not be the
auditor of the company.
• A person who is a member or a director of a private company or partner in a firm which is the managing agent
or the secretaries and treasurers of the company, can not be the auditor of the company.
• A person who is a director or holder of shares of more than 5% in nominal value of the subscribed share capital
of any body corporate which is the managing agent or the secretaries and treasures of the company, cannot be
the auditor of the company.

12. THANK YOU