Management Audit as a Tool of Achieving Organisational Objectives


This chapter reviews the contribution other writers on the topic being discussed.  The review is based text books, journals, newspapers, magazine and publications of related professional bodies like ICAN, ACCS, AIB, Institutes of managers, published audited reports of companies and other organizations etc.

The review is grouped under needing where the various contributions of the auditors were highlighted. The various authors consulted summarized the in views on the concept and process of management audit in their definitions thus:


Management audit is a systematic examination of the systems, procedures, and management processes of the organisation to determine the extend to which that are operating effectively in achieving the objectives of the organisation and indicate where improvements are required.  It is sometimes referred as “operation audit” and the process can be termed management auditing “operational auditing”.

According to professor Epstem, “the management audit is     concerned with management appraisal, but in a context of      evaluating management performance in totality.

While another author, Finch F. define it as “An audit of a company’s policies, objectives, techniques and processes, resulting in a set of conclusions on managerial effectiveness and efficiency, and recommendations on possible way of increasing performance and profitability Hano Yohannesen gave his definition as a systematic assessment of standards and techniques of management.

A very recent and professional qualified competent author,   Caneson L., in his contribution to the accountancy professional        magazine of ACCA of India, gave views as “an independent     appraisal activity within the organization.  For comprehensive   and critical examination of process and functional area of management”.


Armstrong Michael opined, in his book titled “A hand book of MANAGEMENT TECHNIQUES” that “management audit may cover all the major areas of management and operational system sin the organisation”.

Sometimes however, they concentrate on directing and controlling the enterprise.

Professor Epstem appears to agree that management audit should involve evaluating management performance in totality, from highest level downwards.  But Genessan L.  disagreed and stated that it involves activities it highest pa-off areas or the corporate of senior management affairs.

On the issues of scope, the researcher again shares the vies that the management audit should be all embracing since there are basically three management levels of management, namely, top, middle and lower levels the audit of management to achieve its purpose, should involve the various level.  In effect, the management audit should involve the various level.  In effect, the management audit should involve a critical examination and analysis of the management operational and managerial activities from top downwards.  This views was expressed by Armstrong Michael.


According to Armstrong Michael, the management audit should be carried out by independent professional accountants, so they can report to shareholders their findings and fair view of the company’ corporate affairs. It is view summarized what a management audit personnel should be.


In a dynamic world as ours, nothing is static there is always scope for improvement in performance reduction of costs an increased profitability.

As expressed by Armstrong Michael, management audit systematically analyses objectivity and presents an independents view of effectiveness of a company’s management system, procedures and methods and the overall performance of the enterprise it attacks complancy and provides top management with the perspective they need to locate weakness and implement improvements.

Tilley K. W.  in his contribution tot he proceeding of a NATO conference held in Brussels, “leadership and management appraisal”, the purpose of management audit parallels that of financial auditing which is “ the attestation of management representations by an independent examiners i.e. the credibility of management statements regarding its own decisions as proven by an independent third party; these representation are classified in two data groups.

Information that management does not disclose in order words, it is a way of evaluating the performance of management regard to the decision made, the efficiency of its operations and attainment of corporate goals and objectives.


Ganessan .L. In his analysis under management audit, opined that such activity should be on continuous basis, in order to ensure the  improvement in management performance.

However, from the researcher’s point of view the benefits from the use of management audit as a tool for improving management efficiency can better be realized, if the relevant legal and accounting bodies made.  It application on the statutory requirement of business concerns.  This view is recommended by the researcher based on the inherent disadvantages suffered by those companies that do not apply this techniques of management appraisal, but have been judging management audit act across the various areas of management functions are operations, including financial management inter-a lia.


The various expressed by these authors on the above topic are summarized below, in view of the fact the points were almost repeated by each of them.

        The authors are Ganessan .L. and Armstrong Michael the issues suggested by them to be investigated are: –

  1. The suitability, practicality, and present compliance’s or otherwise of the organisation with its designated objects and


  1. The current standing of the organization in relation to the general public with and within its own particulate industrial or commercial field.


  1. The present returns on investors capital, whether poor adequate, or above average and the rate of return over a significant past period.


  1. The relationship of the business with its shareholders and investment public general.


  1. The relationship between management and staff within the business.


  1. Internal control


  1. Financial policies are control whether capital, expenditure, business extension, lost reduction and all aspects of financial planning are so efficient as to above yielded results, subjects to the facts beyond control.
  1. Production: whether production is the most efficient possible in comparison with other business in the industry.


  1. Sales and distribution: Whether selling is being activity pursued in conjunction with efficient economical distribution.
  2. Information flow systems ad their effectiveness.

However, professor Eptem’s view on the issues in the management audit tends to differ a little as he said, the management audit might consider variables as the communication system of the organisation human resource development, management expertise in organisational planning and financial control.  The only extra contribution made by the author is that, it should also include aspects of human resource development, which is really very vital for improving efficiency.

In the light of the views highlighted above, such questions like “is the success of this company based o a good product and favourable economic conditions or is it based on good management? Would another management team done better or proper that the present management? Would normally be asked in management audit process.


        Professor Epstem’s recommendation is that management audit approach should involve a look at the economic value concept; that is the “the discounted earnings potentials of the employee’s or better still, “the incremental earnings of an employee compared with the incremental cost of that employee.

        He further stated that, it should also involve the use of management with quantifiable data that can be easily compared with some pre-determined standards.

        And this past may further involve the preparation of detailed analysis and ration similar to those which are usually prepared in the financial audit and statement analysis e.g labour turnover ratio which might be useful in evaluating a company’s personnel policies.


Tilley K. W. made very useful contributions in this area.

  1. He stated that there is little empirical research to determine the potential value the management to be assessed in the public manner that the management audit proposes.
  2. Management audit according tot he same author is suggestive in nature. For instance, operational management audit which involves looking at the five general areas namely;


  1. General information and objectives
  2. Organization and personnel
  • Financial management
  1. Marketing technique
  2. Systems and procedures.

It is necessary that the auditor base his principles of management.

“Management audit is designed to take the same approach like the financial audit.

Unfortunately, according to him, a set of generally accepted management principles have not been adopted.

It can hardly be objectively based as the authors must be     allowed to perform the audit, subject to his own personnel philosophy, bases and principles of effective management.

It is therefore difficult to make any productions as to the effectiveness of management audit.

Professor Epstem’s view is that there is problem of determining objective measurement techniques in any such audit of management performance.


Right now, according to Tilley K. W. all large public accounting firms have set up management advisory services as an integrated part of the total financial accounting service they provide.  These advisory services perform much of the same functions as outlined in the management audit, but they lack methodical treatment required by the management.

They also lack qualification that would be very useful in this type of audit.

Tilley, therefore proposed, the management audit should involve the use of management techniques that will provide us with quantifiable data that can be easily compared with some pre-determined standards.

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