Green University of Bangladesh (GUB)

Assignment

On

Auditing (ACC - 306)

Topic: Management Audit.

Semester: Summer – 2013

Prepared by:

“YOUTH BOOMERS”

NAME ID SIGNATURE

GL Md. Shahidul Islam 110106050

Md. Moazzem Hossain 110106034

Md. Anqur Chowdhury 110106027

Prepared for:

Ms. Shahreen Sonia.

Lecturer in Accounting,

Department of Business Administration (DBA),

Green University of Bangladesh (GUB),

Dhaka, Bangladesh.

Date: 17th August 2013

Letter of Transmittal

1

August 17, 2013

Ms. Shahreen Sonia

Lecturer, DBA,

Green University of Bangladesh

Subject: Submission of an assignment

Dear Madam

I gladly present to you my assignment titled “Audit Report”. I have made the assignment as you give us to do by help of books and internet.

I believe the knowledge and experience I gathered during the assignment will be extremely helpful in my future professional life. I will be grateful to you if you accept the assignment.

Your support in this regard will be highly appreciated.

Thanking you.

__________________

Md. Shahidul Islam

___________________

Md. Moazzem Hossain

___________________

Md. Anqur Chowdhury

2

Table of Contents

SL. No. Topic Page No.

01. DEFINITION MANAGEMENT AUDIT 04

02.CONCEPT, FUNCTIONS AND OBJECTIVES OF

MANAGEMENT AUDIT

Concept of Management Audit

Functions of Management Audit

Objectives of Management Audit

04, 05

03. SCOPE OF MANAGEMENT AUDIT 06

04. FUNCTIONAL AREAS 07

05. ESSENTIALS OF EFFECTIVE REPORTING 08

06. ADVANTAGES AND DISADVANTAGES OF

MANAGEMENT AUDIT

09

07. BIBLIOGRAPHY 10

08. CONCLUSION 10

3

01. DEFINITION MANAGEMENT AUDIT

A systematic assessment of methods and policies of an organization's management in the

administration and the use of resources, tactical and strategic planning, and employee and

organizational improvement.

The objectives of a management audit are to:

1) Establish the current level of effectiveness,

2) Suggest improvements, and

3) Lay down standards for future performance.

Management auditors (employees of the company or independent consultants) do not

appraise individual performance, but may critically evaluate the senior executives as a

management team. See also performance audit.

02. CONCEPT, FUNCTIONS AND OBJECTIVES OF MANAGEMENT

AUDIT

Concept of Management Audit

Management audit is an emerging concept of auditing. It has been originated from

America. Management audit is an act of evaluation of all the activities of all the

departments with a view to provide appropriate suggestions to the management to help

their work. In other words, management auditing is a future oriented task which evaluates

timely in all the levels of management like production management, sales management

etc. The main objective of management audit is to improve the profit earning capacity,

work of management, objectives of program, social objectives and human resource

development so that organizational goal can be easily attained. It refers to the existence

of control system, compliance of rules and regulations, process of managerial decisions

etc.

4

Functions of Management Audit

Management audit is a difficult and complex task. It performs the following functions:

1. Management audit identifies the objectives of an organization if such objectives

are not set up.

2. Management audit allocates the overall objectives of an organization in small

parts.

3. Management audit reviews the structure of organization and asset of the

organization and decides whether goals can be obtained or not.

4. Management audit examines all the scope of work and liability centers.

5. Management audit provides valuable suggestions to the management after the

evaluation of all above facts.

Objectives of Management Audit

Main objectives of management audit are as follows:

1. To formulate the goal of an organization.

2. To ensure the fulfillment of goals.

3. To help management to improve the activities and procedures.

4. To help all the members of management to make effective discharge of their

duties.

5. To help in the improvement of profits.

5

03. SCOPE OF MANAGEMENT AUDIT

1. The present organizational structure is reviewed in relation to current and

prospective demand of business and study must relate to aims and objectives of

enterprise.

2. It includes the study of present return on investor capital. Whether the return is

adequate, fair of poor.

3. Management audit also requires the study of relationship of business with

shareholders and investing public in general

4. The performance of the concern should be compared with that of the other firms

in the same field. By comparing the different ratios we can get the comparative

position of the business.

5. The aims, objectives, duties should also be kept in mind of the auditor.

6. Financial planning and control also is a part of the management audit.

7. The reviews of the production and sales function are also an important part of the

management audit.

6

04. FUNCTIONAL AREAS

1. Purchase: Methods of purchase, quantities procured, problems on

procurement and discount earned etc;

2. Production: Policy schedules of production, actual quantity produced at

different levels, variances in production schedule, input-output ratios, ideal time etc;

3. Distribution: Organization of sales department, budgeted sales, actual

performance, incentives offered for sales, promotional offers, effectiveness of

distribution channels etc;

4. Personnel: Personnel policy, method of recruiting and training, cost of

man power, promotion policy, appraisal policy, labor welfare activities.

5. Finance and accounting: Financial structure followed, sources of raising

funds, effectiveness of raising finances, extent of working capital needs, financial

controls followed, systems of accounting, effectiveness of cost control devices;

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05. ESSENTIALS OF EFFECTIVE REPORTING

1. Good form and content: The report should be given proper title, headings, sub-

headings and paragraph divisions.

2. Simplicity: The report should be presented in a simple, unambiguous and clear

language.

3. Promptness: Promptness in submitting a report is an essential element of a good

report. The reports should be sent at the earliest and should not be delayed.

4. Relevancy: The reports should be presented only to the persons who need them.

Sometimes the reports are sent to various departments and the secrecy will not be

maintained and expenditure will be more.

5. Consistency: There should be a consistency in the preparation of reports. The

comparability of reports will be possible only if they are consistent.

6. Accuracy: The reports should be reasonably accurate. A report sometimes will be

approximated but approximation should not be done up to the level where

information loses its form and utility.

7. Controllability: The report should be addressed to appropriate persons in

respective responsibility centres and its variance should be mentioned.

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06. ADVANTAGES AND DISADVANTAGES OF MANAGEMENT

AUDIT

Advantages of Management Audit

1. 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.

2. Management audit provides suggestions to the management which helps to

maintain effective management.

3. Management audit helps the management providing suggestions to attain goal of

an organization.

Disadvantages of Management Audit

1. Management auditor cannot understand the practical problems. So, the suggestion

provided by them is theoretical but not practical.

2. Scope of management audit is vague. So, it does not help to achieve specific goal.

3. Generally management gives more emphasis on maintaining books of accounts

rather than concentrating on other factors. So, it consumes time of farsighted

management.

07. BIBLIOGRAPHY

1. http://accountlearning.blogspot.com/2012/02/advantages-and-disadvantages-

of.html

2. http://accountlearning.blogspot.com/2012/02/concept-functions-and-objectives-

of.html

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3. http://www.businessdictionary.com/definition/management-audit.html

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