Page 264 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes The management audit is a more recent concept. It focuses on results, evaluating the
effectiveness and suitability of controls by challenging underlying rules, procedures and
methods.
Management audits, which are generally performed internally, are compliance audits
plus cause-and-effect analysis. When performed correctly, they are potentially the most
useful of the evaluation methods, because they result in change.

12.5 Keywords

CARO: Companies (Auditor’s Report) Order, 2003.
Financial Audit: A financial audit, or more accurately, an audit of financial statements, is the
review of the financial statements of a company or any other legal entity (including governments),
resulting in the publication of an independent opinion on whether those financial statements
are relevant, accurate.
Management Audit: Simply defined, the management audit is a comprehensive and thorough
examination of an organization or one of its components. The audit is implemented to identify
problems or significant weaknesses in the organization or corporation, thus providing
management with a tool to address and repair the problem area.

MAOCARO: Manufacturing and other Companies (Auditor’s Report) Order, 1988.

12.6 Review Questions

1. What is cost audit? Explain in brief.
2. What functions are performed by auditor in cost audit?
3. Explain procedure for cost audit.

4. What clauses are removed, clauses that are expanded and new clauses added while changing
MAOCARO with CARO? Explain pros and cons of this revision.
5. Compare MAOCARO with CARO.

6. What is management audit?
7. How management audits focus on personal attributes and business skills?
8. How management audit can be defined by its scope and objectives?
9. Explain the composition and role played by an audit team.

10. What is the need for management audit?
11. How to conduct management audit?
12. What are the key areas in which management audit can be undertaken in co-operatives?

Answers: Self Assessment

1. False 2. True
3. False 4. True

5. False 6. True
7. Competition 8. Management auditing
9. cause-and-effect analysis

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