Management Audit

Emerged with the application of the principle of indirect control. Management audit is NOT aimed at appraising individual managers. Mainly through achievement of set standards and goals. But appraising managers by looking at the entire system of managing an enterprise, this mainly takes two forms:

(a)    Management function audit covering planning, organizing, staffing, directing and controlling.

(b)    Management decision audit, dealing with the quality of decisions in the areas of long-range and company-wide planning, marketing, operations, personnel accounting and finance.

(c)    Managerial audit has mainly been adopted by accounting firms but the trend is also moving towards certified management audit i.e. an independent appraisal of a company's management by an outside firm. (But the firm should be reputable and recognised and staffed with individuals qualified to appraise a company's managerial system and the quality of managers).

A management audit report must go far beyond the typical accounting auditors statements. It must be able to assess the quality of managers and their systems objectively in fairly specific terms. (But problems will arise if deficiencies are at the top and the appraisers have to report to these very managers) or retained by them. So management audit is a long way from being fully developed as there are still no objective standards which are generally accepted.