Management Audit | Objectives | Advantages | Disadvantages

Management Audit - objectives, scope, advantages, disadvantages
Image: Management Audit – objectives, scope, advantages, disadvantages

What is Management Audit?

Management audit is audit of the management. It is similar to operational audit in several aspects. However, management audit concentrates more on the inefficiencies and weaknesses of the management.

Objectives of Management Audit

The following are the important objectives.

1. To identify the weaknesses and inefficiencies of management in different functional areas, such as production, sales, finance etc.

2. To analyses the different ways to overcome the inefficiencies, or weaknesses.

3. To critically review the organization structure.

4. To evaluate the ways for improving the management efficiency and to select the best are the some of the objectives of management audit.

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.

Advantages of Management Audit

1. Management audit helps in decision making areas such as make or buy, closing down of an unit, acquisition of a business, etc.

2. It also helps in assessing the efficiency of the executives. It serves as a moral check on the executives.

3. Management audit suggests ways to utilize the resources of the organization effectively.

4. Management audit helps in rehabilitation of sick units.

5. Management audit report is jointly reported by experts &om various fields.

6. The opinions and suggestions of a group of experts on the functioning of the organization are possible only through management audit.

Disadvantages of Management Audit

1. Management audit involves high cost and it is suitable only to big organizations.

2. Management audit may create a fear in the minds of the executives and may curb their initiative and innovation.

3. The management auditor may lack independence and may simply take instructions from the top management.

However, an organization can utilize management audit effectively to improve its various functional areas.