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Unit 12: Cost Audit

eroded and what is the extent of cross-subsidization of non-viable services including opening of Notes
new branches. Management audit can help to identity clearly factors which are contributing to
the profitability and viability to the bank, as also those which are not making any contributions
in this regard. The management and administrative costs should be analyzed thoroughly by the
audit to apprise the management of the impropriety in expenses.

The total income of the bank should match its managerial, financial and administrative expenses
and save a certain quantum as met profit. Management audit is a very suitable device for
suggesting remedial measures to improve the profitability and viability of the bank. A factual
and analytical management audit can be an effective test for stimulating action to correct the
weakness underscored by the auditor. Management audit will be able to pinpoint weakness in
control and identify vulnerable areas for suggestion and improvement. The auditor’s task is not
score points by adopting a fault finding approach but to deep the interest of the organization in
mind.

Notes Management audit can help to identity clearly factors which are contributing to the
profitability and viability to the bank. The management and administrative costs should
be analyzed thoroughly by the audit to apprise the management of the impropriety in
expenses.

12.3.10 Benefits of Management Audit

Benefits of Management Audit are given below:
1. Management audit attests the quality of the management in the similar fashion as financial
audit attests the accuracy of the records and financial statements.
2. It permits more objective and complete evaluation of the total management and operating
structure.
3. It enables the management to find specific .problem areas where managers are unable to
come out with fruitful solutions.

4. Identification of major areas needing shoring up is made possible by the management
audit.
5. A check can be made on new policies and practices for both their suitability and compliance.

6. It provides adequate measure for the extent to which the current managerial controls are
effective. .
7. It provides mechanism for continually updating the total management and operating
structure of the firm.
8. Management audit does not concentrate on individual performance.
9. Management audit provides information about strong and weak points of the management
after reviewing policies and programs. So, it helps to the smooth operation of an
organization.
10. Management audit provides suggestions to the management which helps to maintain
effective management.
11. Management audit helps the management providing suggestions to attain goal of an
organization.

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