Management Auditing

What is Management Auditing ?

            Audit of the management of an organization as a whole to assess the management elements of an organization whether it has been planned, implemented, and controlled with the principles of good and correct management so that the functions of an organization can improve the effectiveness of efficiency, and econostation and conformity to the policies of each operation carried out.

 

What are Scopes Of  Management Auditing ?

            The audited areas in management audits are every aspect of effectiveness, efficiency, and econometrics within a company.

 

What is Purpose of Management Audit ?

·         To assist Management in making decisions.

·         To improve the company's operating performance in the future.

·         To Judge over control.

·         To Assess the implementation.

 

What are Benefits of Management Audit ?

·         Increase the Effectiveness, Efficiency and Economization of Operations

                        The main purpose of a management audit is to help management and the organization          being audited to improve the effectiveness, efficiency and economization of operations.

                                                                                                    

·         Recommendations for Improvement

            Audit management does not only produce reports containing audit findings, but must provide recommendations to the company for improvement of these findings.

 

What are Procedures for a Management Auditing ?

·       Planning

            The area and objectives of management audits are generally determined by top management. After knowing the area and objectives of management audit, the management auditor then plans the work to achieve the set goals.

 

            A preliminary survey, as described earlier is a general procedure that auditors take to identify the operations of the company to be audited. Audits can use question lists, flowcharts, Q&A, management reports, and observations in the implementation of preliminary surveys.

 

            The list of questions consists of questions related to problems that affect the effectiveness, efficiency, and econometrics of operations. Auditors, will then assess the answers obtained and gather evidence to corroborate the answers received.

 

            To assist auditors in understanding the flow of goods, services, and transaction flows in operations, auditors can study or prepare flowcharts. When studying the flowchart, auditors will look for inefficiencies and control weaknesses, such as duplication of operations, unnecessary forms, inability to separate tasks, and lack of oversight.

 

            Auditors will also review management reports such as financial reports, budgets, production reports, and sales reports. Specific things that will attract the attention of auditors, such as budget variances (differences between actual and budgeted), increased costs, inventory shortages, obsolete inventory, and production defects. When conducting a preliminary survey, the auditor should observe the surroundings. Unemployed employees or equipment, unattended assets, such as cash and inventory, inefficient factory or office layouts can be areas of potential for improvement to improve effectiveness, efficiency and economization.        

 

            Based on the information obtained from these sources, the auditor will be able to determine some objective criteria for assessing operations. The auditor will also be able to design an audit program that will be used to gather evidence in the assessment of an operation.

 

 

·       Gathering Evidence

            The purpose of gathering evidence is to provide a factual basis for assessing the previously identified performance criteria. The interview is an important tool to obtain evidence during a management audit. The interview should be planned so that it allows the auditor to get as much information as possible through the interview. During and after the interview, it is necessary to prepare a memo to record important points gained from the interview. This memo will strengthen evidence of information obtained through interviews. The auditor will collect the evidence obtained in an archive. This documentary evidence is called a working paper.

 

·       Analysis and Investigation of Deviation / Deviation

When collecting evidence, auditors must be aware of deviations from company policies and ineffective and inefficient performance. The auditor must distinguish an insignificant deviation from a significant deviation. Deviations that have occurred in the past may or may not be corrected, but what the auditor must pay attention to is the effect of these deviations on the future. The auditor's analysis and investigations shall be documented in the auditor's file as they are the basis for determining corrective action.

 

·       Determining Corrective Action After conducting analysis and investigation of a deviation, the auditor must answer the following 2 questions

a. What corrective action should be taken?

b. What corrective actions can be applied?     

 

·         Report Management Audit Results and Follow-up         

            Although a formal report can be considered the final step in a management audit, an informal          report should be generated during the audit. An audit report must contain a written report    describing the audit findings and recommendations for corrections to address the findings.       Management auditors must also monitor the follow-up of recommendations given to       management to determine whether these recommendations have been carried out, and if not       what are the reasons for not implementing these recommendations.

 

Who is The User of Management Auditing Report ?

            Internal Users, generally management.

 

Who does management auditing run ?

            Internal Auditor.

 

What are skills Internal Auditor needs ?

·         Internal auditors must have the knowledge, skills and competencies needed to carry out individual responsibilities. The internal audit function collectively must have or acquire the knowledge, skills and competencies needed to carry out its responsibilities.

 

·         Person in charge of the internal audit function must obtain advice and assistance from competent parties if the knowledge, skills and competence of the internal auditor staff are not sufficient to carry out part or all of their assignments.

 

 

·         Internal auditors must have sufficient knowledge to be able to identify, research, and test for indications of fraud.

 

·         The internal audit function collectively must have knowledge of the risks and controls that are important in the field of information technology and available information technology-based audit techniques.