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Management auidt

CA Paritosh Jaisalmeria (Doing CFA-USA) (90 Points)

22 December 2012

Hey can anybody explain me the concept of managemnt audit in simpler form? is it mandatory or just a appraisal activity?

what is the approach for managemnt audit?

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2 Replies

Rikin (Learner) (140 Points)
Replied 22 December 2012

Management Audit is audit of decisions taken by management.

it is upto management whether to take up audit or not.

there are certain aspects Management Auditor have to check...some of them are

1. Decisions taken by Mgt.

2. Operational efficiency...timing of activities by management

3. Follow up procedures by management of various issues and aspects raised at other levels.

rest you can research and understand.

Thanks and Regards.

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Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 29 December 2012

Hi PSJ90,

Rightly said by Rikin,

However, I would like to share some facts which I came to know in coaching class :-

Mgmt Audit is rarely seen performing. IN INDIA - It is not mandated under any law and it is totally on dicretion of Mgmt. If Mgmt is very confident about their strategies, business conducting, decision making skills etc. then only they will be willing to appoint Mgmt. Auditor.

However, in some countries, as a good corporate practice, it is provided to carry out Mgmt Audit. Frequency is not yearly (obviously). It is performed once in 4 / 5 years.

This is herculean task because this is totally in contrast with our regular audits. It involves interaction with TOP Mgmt itself and furthermore analysing their activities. For this purpose, alone CA is not sufficient, rather it should be done by a team involving CA along with Mgmt experts.