
Why Management Audit is Necessary?
Two words can exactly answer the most pertinent question – why management audit is necessary for an organization? They are efficiency and profitability.
There may be loopholes in the organizational structure, methods, and practices in the management of a business organization that need to be identified. An independent person (sometimes an internal employee) is assigned for the task who takes a neutral, non-biased view to point out the lapses in management techniques. This happens to be the prime aim of management audit (also dubbed operational auditing).
In short, the role of a management auditor is to provide a critical appraisal of the business structure. The critical analysis thus becomes a pointer to necessary actions required to be taken to sort out the lapses, thereby promoting the overall efficiency of the workforce and enhancing business profitability.
The process of auditing is pretty simple – some questionnaire needs to be answered followed by rounds of interviews with employees and managers.
The Sunny Aspects of Having a Management Audit
It is healthy for a business organization to have a business audit from time to time. A business owner would get an insight into:
- Whether the management style conducive to the business purpose?
- Whether the company management has effectively been able to control overall business operations?
- How good is the management team to nurture a healthy relationship with the employees and shareholders of the company?
- Is the management team able to uphold the company’s reputation?
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Management auditing focuses on:
- Assessing existing management policies
- Proper utilization of resources
- Assessing the tactics and strategies behind current business plans
- Appraisal of team efficiency rather than an individual
- Recruitment and retention policies of the company
The top objectives of having a management audit are:
- Clearly define the prime objectives of the organization
- The setting of a well-defined organizational structure with clear-cut lines of who reported to whom (to avoid confusion during business reporting at the close of the day).
- The setting of detailed targets for all segments of the business
- Challenging existing rules and regulations to work out an effectiveness level
- Suggesting improvement measures for giving an impetus to business performance in the forthcoming months
- Suggesting ways to restructure the organization and ensure high-quality service at all quarters
- More effective resource utilization planning
- Incorporating management information systems to reach production and work efficiency goals
- Identification of weak points or managerial inefficiencies concerning core functional areas of the business, namely finance, sales, and production.
In cue to the above point, it is noticed that management audit has a connection to the financial analysis. It brings forth the discussion which has been stated just below.
Is Management Audit the Same as Financial Audit?
Management audit is all about examining, reviewing, and evaluating non-financial data generally. As stated in the objectives, it can identify weak spots in the managerial processes of the finance department. It can address some financial questions too, like:
- The management’s role in the annual budgeting of the company
- The compliance level of the current policies employed by the finance team of the company.
Based on suggestive guidance of a management auditor professional financial services in Mumbai (and other cities) are thus required to smoothly operate the finance department. To work out on best financial measures seek the help of a tax consultant in Mumbai.
Management auditing should be complemented with finance audit. For the larger business interest get a thorough finance statement prepared with the best accounting services in Mumbai.