What Is a Management Audit?
A management audit is about the systematic and structured as well as an independent review, analysis, and evaluation of the competencies and capabilities of management in the implementation of corporate objectives. As a rule, such audits are carried out as part of management development, but also in “critical” corporate situations where a strategic realignment or other corporate upheaval is planned.
A management audit is not intended to assess the performance of individual managers, but to evaluate the effectiveness of the entire management team in working in the best interests of all stakeholders, maintaining good relations with employees, and upholding reputational standards. The management audit is designed to evaluate how well a company’s management team is using its strategies and resources. It examines whether actions are being taken in the best interests of shareholders, employees, and the company’s reputation.
Management audits are often conducted with the assistance of external, independent consultants who are hired by the board to conduct the audit. Synonymous terms for “management audit” are “management assessment,” “management appraisal,” “management due diligence,” “potential analysis,” or “executive assessment.”
This article discusses:
Areas of management audit
Management audits go beyond traditional audits. Such an audit reviews all aspects of management to assess overall performance. It covers management areas such as planning, organizing, coordinating, and directing. Comprehensive management audits are often conducted prior to mergers, restructurings, bankruptcies, and succession planning. It is hoped that they will reveal weaknesses in a company’s management at an early stage.
The specific goals pursued by a management audit can vary depending on the company:
- Pursue appropriate and effective goals
- Get desired results
- Detect errors as well as irregularities in the management process
- Helping management to perform their duties effectively
- Assist in the coordination of various departments
- Facilitate staff training and tracking of marketing strategies
- Simplify comparison of inputs with outputs
- Ensure strong relationships with outsiders
- Ensure efficient internal organizational structure
Need for and benefits of a management audit
Reports on policy matters and their implementation are very important to improve management efficiency. Auditors advise management on various matters related to the performance of different departments as well as the organization as a whole. They evaluate the actual performance by comparing it with predefined standards. In doing so, they uncover any kind of defects and irregularities in the work of the management. It can be said that management audits help to improve the performance and efficiency of the management.
The benefits of management audit at a glance:
- It is helpful in setting management plans, goals and policies.
- It is beneficial in achieving the set goals of the management by coordinating with the staff.
- It is very helpful to create a strong communication system with outsiders and within the different departments.
- It is helpful to evaluate the performance of management.
- It is helpful to establish good relationships with employees.
- It is helpful to work out tasks, rights and duties of employees and market strategies.
- It helps to plan budgets of the company and manage resources efficiently.
Planning the management audit
It is important to plan a management audit thoroughly. This involves establishing the outline for the entire process and procedures of the audit from start to finish. The following points should be reflected in the planning:
- Examine the structure of the company.
- Examine whether the principles of good organization are being followed.
- Have a detailed discussion with management about goals and plans.
- Examine whether current company policies that have been adopted are resulting in achieving desired goals.
- Identify the areas for improvement.
- To make recommendations for improvement.
- To examine whether an organization’s control system is adequate and effective
- To examine the manufacturing process to locate factors that impede maximizing production.
- Observe the human resources departments to examine the company policies, training, and motivational programs currently offered to the employees of.
- Verify that the available space and physical equipment in the company are being used optimally.
The management audit report
The report submitted by the auditor should give a true and accurate assessment of the company’s operations. It should also include recommendations for improvement in management policies, procedures, or any other area. A management audit report should not skimp on criticism of management, but neither should it be merely condemning. The report should cover the following areas:
- An assessment of whether relations between employees and management are cordial
- Identify the weak points and suggestions for improvement.
- To address the production methods and procedures.
- Explain the operating efficiency and return on investment.
- Provide an assessment of whether the return to shareholders is appropriate.
Your powerful app for management audits
Management audits involve capturing notes, conversations and photo evidence to verify that company goals are being followed and met. Often, more time is spent on paperwork and data entry than is spent on analysis and recommendations.
Lumiform is a powerful and mobile app and software solution for audit management. It allows management audits to be conducted on a smartphone or tablet while consultants are on site – online and offline. Notes and photos are easily added. All responsible persons can access the respective audit at any time and from any location. Lumiform helps to work and communicate effectively and to minimize risks and reputational damage.
These are the benefits companies can take advantage of for their management audits:
- With the flexible form builder, any individual paper list can be converted into a digital checklist in just a few minutes.
- All audit results are automatically bundled into one report and can be sent to stakeholders.
- Extensive analyses help to uncover inefficient areas in management more quickly and thus to continuously improve processes.