Management And Operational Audit

Question 1

Management vs operational audit

Answer 1

Complementary and supplementary to each other as management audit is concerned with quality of managing and operational audit is concerned with quality of operations

Basic difference is not in method but in level of appraisal. In management audit the auditor evaluates decision taken at the level of top management wrt formulation of plans and policies whereas operational auditor evaluates effectiveness, efficiency and economy of operations

Question 2

Need/desirability of management audit

Answer 2

For detecting and overcoming current problems

Assist the organization in accomplishing desired objectives

Help in ailing industries

Improved management in PSU

Problems can be detected Before the fact rather than after the fact as in FS audit. It is a forward looking approach following the analogy of preventive maintenance. Detecting problem on a small scale

Question 3

Organizing the management audit

Answer 3

Devising the statement of policy ( scope, objective & authority of function )
Allocation of personnel (adequate experience)
Staff training ( to maintain qualitative standards)
Time and other aspects
Location of the audit function within the organization (hierarchical status)
Frequency of audit

Question 4

Conducting a management audit

Answer 4

Getting the facts through interviews

Measuring performance through management audit questionnaire

Question 5

Management audit questionnaire

Answer 5

Comprehensive and constructive examination of an organizations management function

Appraisal of management actions in accomplishing the organizations objectives

Highlight weakness and deficiencies of the organisation

Review of management functions of planning, organizing, directing and controlling

Evaluation of effectiveness or decision making process in accomplishing organization objectives

Question 6

Classification/categories of management audit report

Answer 6

Report prepared after visit to the unit

Periodical report which summarizes the main audit findings and conclusions for the period under consideration and gives a concise review of the activities in the organisation

Reports on results of special investigation & inquiries

An annual report

Question 7

Types of management audit report

Answer 7

Oral report

Interim written report

Regular written reports

Summary written report (flash reports)

Question 8

Causes of the behavioral aspect related with management audit

Answer 8

STAFF LINE CONFLICT
Management auditors are staff people while the members of the other department are Line people
Management auditors has superiority complex and they may think that there solutions are the only answer
Staff do not consider Line before advising as a result line may not use advice of staff properly
Lines does not co operate with staff and do not provide sufficient information

CONTROL

There is a fear that the actions taken based on the management audit report will affect line people. The cause are-

Fear of criticism as a result of adverse audit findings
Fear of change in day to day working habit because of audit recommendations
Punitive actions by superior because of reported deficiencies
Hostile audit style

RESISTANCE TO CHANGE

Question 9

Solution to the behavioral problems in management audit

Answer 9

Demonstrate that audit is part of overall programme of review for protective and constructive benefit

Objective of review is to provide max service in all feasible managerial dimensions

Review will be conducted with the minimum interference with regular operations of the personnel

Responsible officer shall be kept fully informed and have an opportunity of review the findings and recommendations before the audit report is formally released

Create atmosphere of trust and friendliness by-

Constructive criticism - make obvious in reports the value of his comments in tangible terms

Reporting methods - adopting a friendly and firm tone in report

Participative approach - improve suggested must be first discussed with the one who is going to implement it

Question 10

Types of operational audit

Answer 10

Functional audit
Organizational audit
Special assignments

Question 11

Objectives and scope for operational auditor

Answer 11

Appraisal of controls

Evaluation of performance

Appraisal of objectives and plans - PPC quality of work load - productivity, personnel, cost, quality & work load

Appraisal of organisational structure