Page 260 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes responsibility and the power of delegation at each level should be clearly spelt out. A clearly
defined organizational structure ensures tight system and procedures with minimum loopholes
and gaps. Management audit will have to focus on this and try to determine to what extent
executives and managers at medium and lower level have utilized the authority vested in them.
Remedial measures can consequently be suggested for appropriate delegation to achieve the
desired results.
Decision-making: Correct and prompt decision making, can help in improving profit and services
of cooperatives. Decision making comprises a series of acts at different levels in a hierarchy.
Assessment of the quality of the decisions taken will have to take into account several factors-
some controllable and some uncontrollable. Although, it is the effort of every organization to
appoint right man at the right position to ensure quality decision-making. It is not always
possible. Management audit will have to take into account the executive caliber of people at
different levels, especially in sensitive areas like personnel department, credit appraisal and
public relation. In credit cooperatives management audit will be required to ascertain as to what
extent the power of writing off bad debts, sanctioning credit limit and various types of loans,
settlement of disputes between banks and staff should be delegated to middle and lower level
staff.

Management audit will examine situations critically and poet out faults and whether these are
at top level or lower level. Finally this will help in deciding as to what extent power should be
delegated to middle and lower level for effective and quick decision making. The expectations
of the clients of the bank regarding services to be rendered should be the guiding factor for
delegating power. The audit should reach conclusions keeping in mind the capacity, capability
and expertise of the person who has been delegated powers. It should also be able to assess
whether failures are due to deficiency at individual eve or due to lacunae in organizational
policies.

Notes Management audit will have to take into account the executive caliber of people at
different levels, especially in sensitive areas like personnel department, credit appraisal
and public relation.
Human Resource Development: The employees of a cooperative contribute significantly to its
development. Hence if employees are expected to make tangible contribution it is necessary
that their morale is kept high. Management audit should take into an account the morale is kept
high. Management audit should take into account the employee’s level of motivation, the
infrastructure developed for personnel in the areas of training, promotional prospects and
incentives available for exemplary performance. A review of the cooperatives personnel policies
in respect of transfer, placements and promotion will indicate the important areas where
management audit may be conducted. Management audit will generate conducive atmosphere
in the ‘Organization by which good results will be ensured.

Financial Viability: The present day problem of cooperative banks is primarily that of
profitability and viability which calls for a definite orientation in management audit exercise.
Cooperative banks business essentially comprises lending to non-farm sector and also agriculture
financing. Besides; these banks are required to undertake higher priority sector lending as
compared to private and public sector banks, and also have to implement government sponsored
programmes which affects their profitability. Being placed in such a position the cooperative
banks are a not able to extend desired lending services to their customers, and as a result they are
not able to generate sufficient income beyond their routine earning of interest.
These banks could undertake the business of bills of exchange and foreign exchange also. With
the help of management audit it is possible to determine at what level profitability is being

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