This document is an assignment on management audit submitted by a group of students called "Youth Boomers" at Green University of Bangladesh. It contains definitions of management audit, discusses the concept, functions and objectives of management audit. It also outlines the scope and functional areas covered in a management audit. The document concludes by describing the essentials of effective reporting and discussing the advantages and disadvantages of conducting a management audit.

1. Green University of Bangladesh (GUB)
Assignment
On
Auditing (ACC - 306)
Topic: Management Audit.
Semester: Summer – 2013
Prepared by:
“YOUTH BOOMERS”
NAME
ID
GL Md. Shahidul Islam
SIGNATURE
110106050
Md. Moazzem Hossain
110106034
Md. Anqur Chowdhury
110106027
Prepared for:
Ms. Shahreen Sonia.
Lecturer in Accounting,
Department of Business Administration (DBA),
Green University of Bangladesh (GUB),
Dhaka, Bangladesh.
Date: 17th August 2013
Letter of Transmittal
1

2. August 17, 2013
Ms. Shahreen Sonia
Lecturer, DBA,
Green University of Bangladesh
Subject: Submission of an assignment
Dear Madam
I gladly present to you my assignment titled “Audit Report”. I have made the assignment as you
give us to do by help of books and internet.
I believe the knowledge and experience I gathered during the assignment will be extremely
helpful in my future professional life. I will be grateful to you if you accept the assignment.
Your support in this regard will be highly appreciated.
Thanking you.
__________________
Md. Shahidul Islam
___________________
Md. Moazzem Hossain
___________________
Md. Anqur Chowdhury
2

3. Table of Contents
SL. No.
01.
02.
Topic
Page No.
DEFINITION MANAGEMENT AUDIT
CONCEPT,
FUNCTIONS
AND
OBJECTIVES
04
OF
04, 05
MANAGEMENT AUDIT

Concept of Management Audit

Functions of Management Audit
03.
 Objectives of Management Audit
SCOPE OF MANAGEMENT AUDIT
06
04.
FUNCTIONAL AREAS
07
05.
ESSENTIALS OF EFFECTIVE REPORTING
08
06.
ADVANTAGES
07.
MANAGEMENT AUDIT
BIBLIOGRAPHY
10
08.
CONCLUSION
10
AND
DISADVANTAGES
OF
09
3

4. 01.
DEFINITION MANAGEMENT AUDIT
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.
The objectives of a management audit are to:
1) Establish the current level of effectiveness,
2) Suggest improvements, and
3) Lay down standards for future performance.
Management auditors (employees of the company or independent consultants) do not
appraise individual performance, but may critically evaluate the senior executives as a
management team. See also performance audit.
02.
CONCEPT, FUNCTIONS AND OBJECTIVES OF MANAGEMENT
AUDIT
Concept of Management Audit
Management audit is an emerging concept of auditing. It has been originated from
America. Management audit is an act of evaluation of all the activities of all the
departments with a view to provide appropriate suggestions to the management to help
their work. In other words, management auditing is a future oriented task which evaluates
timely in all the levels of management like production management, sales management
etc. The main objective of management audit is to improve the profit earning capacity,
work of management, objectives of program, social objectives and human resource
development so that organizational goal can be easily attained. It refers to the existence
of control system, compliance of rules and regulations, process of managerial decisions
etc.
4

5. Functions of Management Audit
Management audit is a difficult and complex task. It performs the following functions:
1. Management audit identifies the objectives of an organization if such objectives
are not set up.
2. Management audit allocates the overall objectives of an organization in small
parts.
3. Management audit reviews the structure of organization and asset of the
organization and decides whether goals can be obtained or not.
4. Management audit examines all the scope of work and liability centers.
5. Management audit provides valuable suggestions to the management after the
evaluation of all above facts.
Objectives of Management Audit
Main objectives of management audit are as follows:
1. To formulate the goal of an organization.
2. To ensure the fulfillment of goals.
3. To help management to improve the activities and procedures.
4. To help all the members of management to make effective discharge of their
duties.
5. To help in the improvement of profits.
5

6. 03.
SCOPE OF MANAGEMENT AUDIT
1. The present organizational structure is reviewed in relation to current and
prospective demand of business and study must relate 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
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.
6

7. 7. The reviews of the production and sales function are also an important part of the
management audit.
7

8. 04.
FUNCTIONAL AREAS
1.
Purchase: Methods of purchase, quantities procured, problems on
procurement and discount earned etc;
2.
Production: Policy schedules of production, actual quantity produced at
different levels, variances in production schedule, input-output ratios, ideal time etc;
3.
Distribution: Organization of sales department, budgeted sales, actual
performance, incentives offered for sales, promotional offers, effectiveness of
distribution channels etc;
4.
Personnel: Personnel policy, method of recruiting and training, cost of
man power, promotion policy, appraisal policy, labor welfare activities.
5.
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;
8

9. 05.
ESSENTIALS OF EFFECTIVE REPORTING
1. Good form and content: The report should be given proper title, headings, subheadings and paragraph divisions.
2. Simplicity: The report should be presented in a simple, unambiguous and clear
language.
3. 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.
4. 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.
5. Consistency: There should be a consistency in the preparation of reports. The
comparability of reports will be possible only if they are consistent.
6. 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.
9

10. 7. Controllability: The report should be addressed to appropriate persons in
respective responsibility centres and its variance should be mentioned.
10

11. 6.
ADVANTAGES AND DISADVANTAGES OF MANAGEMENT
AUDIT
Advantages of Management Audit
1. Management audit provides information about strong and weak points of the
management after reviewing policies and programs. So, it helps to the smooth
operation of an organization.
2. Management audit provides suggestions to the management which helps to
maintain effective management.
3. Management audit helps the management providing suggestions to attain goal of
an organization.
Disadvantages of Management Audit
1. Management auditor cannot understand the practical problems. So, the suggestion
provided by them is theoretical but not practical.
2. Scope of management audit is vague. So, it does not help to achieve specific goal.
3. Generally management gives more emphasis on maintaining books of accounts
rather than concentrating on other factors. So, it consumes time of farsighted
management.
07.
BIBLIOGRAPHY
1. http://accountlearning.blogspot.com/2012/02/advantages-and-disadvantagesof.html
2. http://accountlearning.blogspot.com/2012/02/concept-functions-and-objectivesof.html
11

12. 3. http://www.businessdictionary.com/definition/management-audit.html
12