Management audit can be defined as an objective and independent appraisal of the effectiveness of managers and therefore the effectiveness of the company structure in the achievement of company objectives and policies. Its aim is to spot existing and potential management weaknesses within a corporation and to recommend ways to rectify these weaknesses.
Objective of Management Audit
(a) To ensure optimum utilization of human resources and available physical facilities.
(b) To means deficiencies in objectives, policies, procedures and planning.
(c) To suggest improved methods of operations.
(d) To point out weak links in organizational structure and in internal control system and suggesting
(e) to help management by providing early signals of sickness, ways and means to avoid the same; and
(f) To anticipate problems and suggest remedies to unravel them in time.
Scope of Management Audit
The scope of Management Audit has no limitations. The areas of review depend on the objectives of the business.
Accordingly, the scope of Management Audit may include:
(a) The suitability, practicability and present compliance or otherwise of the organization with its designated objects and aims.
(b) The present reputation of the organization in reference to the general public and within its own particular industrial or commercial field.
(c) The rate of return on investors’ capital – whether poor, adequate or above average.
(d) Relationship of the business with its own shareholders and the investing public in general.
(e) The ratios of operating returns and therefore the rate of return on capital projects.
(f) The relationship between management and staff within the business.
(g) The aims and effectiveness of management at its various levels such as top level, middle level and operational level.
(h) Financial policies and control relating to production, sales and distribution and in other functions of the organization. improvements.