Page 254 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes
Table 12.2: Compliance Audits vs. Management Audits

Compliance Audits Management Audits
Requirements are accepted as given Requirements are challenged
Auditor assesses whether requirements are Auditor assesses whether requirements are
implemented effective and suitable.
Emphasizes stability Emphasizes results
Designed for high-risk ad third-party Generally limited to internal applications
applications

12.3.2 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.

12.3.3 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.

12.3.4 The Audit Team

Normally the Management Audit Team consists of two Executive Search Consultants. It is
prerequisite to the success of the process that the consultants involved are industry and
management- as well as executive search experienced. They must be capable to understand the
client’s business and strategy and the need to have a good view as to the market and competitive
scenario. It is important to give clients and candidates confidence and trust in process and
people. If these preconditions are met, Management Audits will bring remarkable added value
to companies.

12.3.5 Needs for Management Audit

Management audit is essentially a review of the performance of various managers. It does not
examine whether the procedures have been followed or not or whether all the formalities are

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