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HAND WRITTEN NOTES ON MANAGEMENT AUDIT USEFUL FOR ICWAI | CMA Final

HAND WRITTEN NOTES ON MANAGEMENT AUDIT USEFUL FOR CMA FINAL

HAND WRITTEN NOTES ON MANAGEMENT AUDIT USEFUL FOR CMA FINAL:INTRODUCTION TO MANAGEMENT AUDIT;
Audit means examination. Where as management audit means complete examination of transactions of an organisation. Management audit checks the effectiveness of managers and their compliances with company on professional standard and the reliability of management date, the quality of performance of duties and recommendations for improvement.

DEFINITION OF MANAGEMENT AUDIT AS PER “CIMA”:
“Management audit is an objective and independent appraisal of the effectiveness of the managers and effectiveness of the corporate structure in the achievement of company objectives and policies. Its aim is to identify existing and potential management weaknesses within an organisation and to recommend ways to rectify these weaknesses”.

NEED FOR MANAGEMENT AUDIT:
It helps management in framing basic policies for the organisation and to define objectives.
management audit helps in preparing a viable and achievable plan for the organisation.
It helps in setting up an organizational framework to implement the plans.
It assists in designing systems and procedures for smooth operation of the organisation.
It helps in designing and reviewing management information system (MIS) for decision making to help in coordination, motivation and control of the operations.
It assists in analyzing SWOT (strengths, weaknesses, opportunities and threats) of the organisation and assists in making the organisation stronger.
It can help in analyzing social-cost benefit analyses for public projects like dams, power houses, national highways etc.
It is essential whenever a unit is planned to be taken-over or an amalgamation or merger with other unit is proposed.

MANAGEMENT AUDIT IS USEFUL TO:
It generally extends over all the resources deployed and commercial activities of the organisation including Directors and their functions.
Managers, supervisors and their functions.
Organizational structure.
Equipment and facilities, and their utilization
Methods and systems.
Security of information.
Resources utilization and their adequacy and efficiency.
Planning and control etc.

MANAGEMENT AUDIT PROCEDURE:
The following procedure is followed in management auditing.
Make a primary survey of the activity under audit to obtain necessary background and other working information for use in conducting the audit.
Study the basic charter or assignment of responsibility of the activity under audit to ascertain the authorized purposes and related authorities of the activity and any applicable restrictions or limitations.
Review pertinent parts of the system of management control by studying the policies established to govern the activities under audit, testing the effectiveness of specific operating and administrative procedures and practices followed, and fully exploring all significant weaknesses encountered.
Report on the findings of the audit work performed to those responsible for receiving or acting them together with the recommendations for improvement.

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