What is Management Audit? Define the Objective and Limitations of Management Audit.

The management audit is an examination, scrutiny and appraisal of the plans, policies, objectives, means of operation and the use of physical facilities. This review the policies and the actions of management in turn. It will normally be so revealing as to encourage action of a perspective nature that will put into effect the objects for which it was originally demanded.

The Objectives of Management Audit are:

  • To reveal defects or weakness in any of the elements examined by the management auditor and to suggest improvement to obtain best possible results of operation of the concern.
  • To ensure the most efficient administration of operation essential for the smooth running of the business.
  • To obtain the efficiency and effectiveness of the management.
  • To suggest ways and means for the achievement of objectives and targets set forth by the management.
  • To assist at all levels of management in the effective discharge of their duties and responsibilities.
  • To facilitate the most effective relationship with the outside world and the most efficient organization and smooth running internally.
  • To evaluate performance- by relating inputs (human and physical both) with output.
  • To assist the management to establish good relationship with staff to enable it to elaborate the duties, rights and liabilities of the entire personnel.

Importance of Management Audit:

The management audit is valuable as it helps in achieving the following:

  • It helps in the reduction of wastage’s and with the reduction of the wastage the costs will be minimized.
  • It helps in translation of policies into action.
  • It helps in improving the profitability of the concern.
  • It aids in ensuring the optimum utilization of resources.
  • It helps in performance evaluation of various activities.

Limitations of Management Audit:

  • Management audit tries to find unnecessary faults in the operating system of the concern.
  • It fails to serve any material purpose, that is it is an unnecessary interference in the administration of the concern.
  • It discourages initiative and dynamism.
  • It involves additional cost to the concern.
  • The recommendations in the management audit may be ideological and it may be difficult to implement.

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