Management Audit Process

UNIT 1: Introduction to Management Audit

Characteristics of an Auditor

An auditor should possess objectivity, strong observation skills, an analytical mind, and emotional stability.

Company Classification

Companies in the private sector are classified according to their size as:

  • Micro
  • Small
  • Medium
  • Large

Management Audit as a Tool

Management Audit, conducted within an organization, serves as a tool for organizational growth.

Scope of Administrative Audit

Factors influencing the scope of an Administrative Audit include:

  • The size of the organization
  • The legal nature of the organization
  • The organization’s turnover
  • The industrial sector of activity

Quality Management in Audit

The objectives of Quality Management in Audit are:

  • Raising the level of performance in all areas
  • Producing competitive goods and services

Objective of Change Management Audit

The objective of Change Management Audit is to conduct the audit in a way that is receptive to organizational change.

Internal Audit Report

The Internal Audit report is intended for internal use within the organization.

Scope of Audit Management

Audit Management is applicable to any production organization.

Information in Management Audit

Management Audit involves the application and evaluation of organizational behavior in relation to pre-set standards.

Purpose of Management Audit

The purpose of Management Audit is to achieve a sustainable competitive advantage after specifying the level of performance.

UNIT 2: Labor Standards and Ethics in Management Audit

Elements of Labor Standards Enforcement

The basic elements in Labor Standards Enforcement are:

  • Planning and supervision
  • Review and evaluation of internal control
  • Collection of evidence

Professional Secrecy

Professional secrecy refers to the ethical obligation of confidentiality, where an individual promises to remain silent about information learned during their professional duties.

Content of Management Audit

The content of a Management Audit report includes:

  • Scope
  • Objectives
  • Comments
  • Conclusions

Criteria of Administrative Ethics for Auditors

The criteria of Administrative Ethics for Auditors are the rules to be observed on a daily basis.

Mental Independence

Mental independence refers to the ability to form an objective, unbiased, and fair opinion.

Study and Evaluation of Internal Control

The study and evaluation of internal control involves assigning appropriate duties to employees and determining the necessary tests to be conducted.

Report Preparation in Audit Management

Reports in Audit Management should be prepared in a simple, understandable, and concise manner.

Objectivity of the Report

The report should present comments and conclusions fairly and objectively.

Classification of Administrative Auditing Standards

Administrative Auditing Standards are classified as:

  • Personal standards
  • Performance standards of work
  • Reporting standards

Characteristics of Personal Standards

Personal standards for auditors include professional competence, technical expertise, due care, mental independence, and diligence.

UNIT 3: Organizational Systems and Management Audit

System of Organization

A System of Organization involves ordering and interrelating different areas to ensure effective execution.

Coordination System

A Coordination System is the process of integrating the objectives and activities of various units to achieve organizational goals efficiently.

Control System

A Control System is a process to determine what is being done, assess its value, and take corrective action.

Management System

A Management System involves conducting operations through the cooperative efforts of subordinates.

Use of Management Audit

Management Audit helps to modernize techniques, methods, and processes, leading to improved and enhanced company operations.

Goal Planning System

A Goal Planning System involves setting a goal that guides the efforts of a leader.

Program Planning System

A Program Planning System defines goals, policies, and procedures to determine the development of activities with more precision.

Departmentalization

Departmentalization involves dividing and grouping functions and operations into specific units within an organization.

Framing of Management Audit Functions

Management Audit functions are framed within the hierarchical structure of the organization.

Functional Coverage of Audit

The audit covers the review and evaluation of the functional areas of an organization, treating each area as a unit for evaluation and updating.

Division and Specialization of Labor

Division and specialization of labor involves separating and classifying activities, leading to expertise and improved work performance.

Resourcing System

A Resourcing System encompasses all the items required to take action.

Work of an Administrative Auditor

An Administrative Auditor detects areas within a company that need to improve their effectiveness.

Budget Planning System

A Budget Planning System involves creating financial statements that estimate income and costs for a specific period.

Description of Functions

A clear description of functions defines the activities and duties to be performed in each position and unit within an organization.

Policy Planning System

A Policy Planning System comprises the general principles of action intended to guide the administration of a company.

UNIT 4: Methodology and Reporting in Management Audit

Methodological Framework

The actions of a Management Audit should always be guided by a methodological framework.

Types of Information

The most representative types of information in a Management Audit are the executive summary, the general report, and the highlights report.

Basis for Action in Diagnosis

The basis for action in determining the diagnosis of trustees is the frame of reference.

Reformulation Stage

The investigation stage is where reformulation of strategies, goals, timelines, etc., can occur.

Factors Reviewed in Planning

The planning stage reviews administrative processes and their specific elements.

Phases of the Methodology

The methodology of a Management Audit consists of four phases: planning, implementation, review, and follow-up report.

Attributes of Results, Conclusions, and Recommendations

The results, conclusions, and recommendations presented in the report must be objective, timely, clear, useful, and purposeful.

Objective of Monitoring

The general objective of monitoring is to establish guidelines for addressing the auditor’s comments and ensuring their implementation and effectiveness.

Reliable Verification

Reliable verification in Management Audit is represented by evidence.

Techniques for Information Collection

Techniques for collecting information include direct observation, documentary research, and interviews.

Phases for Implementing Recommendations

The phases for implementing recommendations are program preparation, resource integration, and program execution.

Methodology for Information Organization

The methodology of the Administrative Audit provides the auditor with a framework for identifying and organizing information.

UNIT 5: Conclusion and Follow-up in Management Audit

Purpose of Management Audit

The purpose of Management Audit is to achieve sustainable competitive advantage after specifying the level of performance.

Conclusion of the Audit

The conclusion of the audit involves discussing the organization’s performance objectively and critically to strengthen its distinctive capabilities and create conditions for sustainable growth.

Administrative Procedure Audit

Administrative Procedure Audit provides technical support by capturing and testing data through direct observation, analysis, and confirmation.

Instrumentation in Management Audit

Instrumentation in Management Audit involves selecting and applying techniques for data collection, measurement, handling of working papers, and evidence gathering.

Auditor’s Opinion with Limited Scope

If the scope of the audit was not sufficient, the auditor will issue a negative opinion.

Monitoring Guideline

A general guideline for monitoring in Management Audit is to define the areas where the implementation of proposed changes will be assessed.

Supervision of Work

Supervision ensures that actions in the Management Audit are aligned with the objectives.

Purpose of Targets

Targets in Management Audit establish the actions to be taken to implement the audit in a sequential manner.

Techniques Used in Instrumentation

Techniques used in instrumentation include documentary research, direct observation, access to information networks, interviews, questionnaires, and warrants.

Characteristics of the Head of Management Audit

The Head of Management Audit should possess knowledge and experience in implementing administrative audits.

Follow-up Guideline

A general guideline for follow-up in Management Audit is to establish adequate mechanisms for controlling the suggested proposals and ensuring their compliance.

Classification of Evidence

Evidence is classified as physical, documentary, testimonial, and analytical.

Steps in the Review Process

The steps in the review process of a Management Audit are to meet, discover, check, order, define, identify, and explain behaviors.

Criteria for Interviews

Interviews with department heads prior to the audit should aim to ensure compliance with the audit process.

Purpose of Review

The purpose of the review in Management Audit is to establish procedures and analytical approaches to guide the context of information gathering and the development of the administrative diagnosis.

Sources of Information

Internal and external entities can be used as sources of information for the audit.

Follow-up

Follow-up in Management Audit involves monitoring the comments and recommendations resulting from the audit.

Elements of an Administrative Audit Opinion

An Administrative Audit Opinion contains the following elements: title, objective, introductory paragraph, opinion paragraph, date, and signature.