Reengineering, deregulation, and other change-related activities have broken down the traditional hierarchical structures and changed the organizational reporting relationships and management responsibilities. Each of this one suggests new demands, challenges and opportunities for the management and the board. Together they emphasize the need for effective, dynamic and competent management assurance function. Today management assurance is critical for strong corporate governance, risk management, effective internal control and efficient operations. In management audit, the auditor is to make his tests to the level of top management, its formulation of objectives, plans and policies and its decision making.
Looking into the recent business scenarios it has become imperative for businesses to explore those mistakes that could have landed the organization into a shutdown situation. Management audit offers assessment of controls and their effectiveness and relation with existing manner of work. It can be said that they are a vital part of internal audit. Management audit is fruitful in way that these are methods of evaluation within the company and can result in bringing the required change. It is a systematic examination of decisions and actions of the management and to analyse the performance. Management audit stresses on results, evaluates the effectiveness and suitability of controls and challenges underlying rules, procedures and methods. Management audits do not check or appraise individual employee performance; they critically evaluate the senior executives as a management team.
To conduct management audit we assess and look into the following key elements:
Management structure including delegation of authority, planning and budgeting.
Review and assessment of risk management framework and its effectiveness with a view to provide suggestions for strengthening the same.
Reports required for a proper management and the reports actually received.
Internal controls.
Personnel policy and personnel management including requirements, training, welfare, incentives and disincentives.
Getting the facts through interviews.
Measuring performance through the Management Audit Questionnaire.
Identifying the deficiencies to bridge the gap.