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Management Audit: Definition, Functions, 7 Objects, and Stages

Management Audit

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You must know that auditing is an integral concept in every document and record reporting of a company or organization. In practice, there are various types of audits that companies conduct depending on the needs and urgency of the company. One type of audit that will be the topic of discussion this time is a management audit.

Management audits are as common as they sound to you. Indeed, management audits are one of the most popular and most common types of audits conducted for a company.

Thus, management audit is one of the most important procedures in a company's final report.

Management audit plays a role in various types of activities to check the reports of a company or organization.

A management audit is useful for seven corporate audit objects. One of the important functions of this audit is being able to provide a rating scale for the effectiveness of team performance.

This article will invite you to get closer and understand the ins and outs of management auditing. Starting from the definition of a management audit, how it differs from other types of audits, the seven audit objects audited by a management audit, to the functions and stages that need to be carried out in the management audit process. Check out the full explanation below.

Definition of Management Audit

Do you know what a management audit is? Or are you familiar with the term management audit, but don't know the purpose and explanation of a management audit.

In this type of audit, a management audit is a checking and analyzing process that applies to evaluate the competence and performance of the company in completing its targets.

This audit examines several important aspects of a company's performance and management oriented towards the company's ability to meet the targets that must be achieved within a certain period.

In this type of audit, a company must submit their performance report to an independent auditor.

Because this report will later become a benchmark in measuring the objectivity and resilience of the company in the future. Usually the audit results will be in the form of statistical data charts that can later be displayed by the company.

So, you can conclude that a management audit is useful for measuring the stability of a company in terms of performance and success in completing a mission and target achievement for some period, generally once a year.

Management audits are very useful for a company in making decisions regarding the company's policy patterns in the team's future performance, such as the performance of each employee in a division, performance between divisions, and the success of a team in completing tasks.

Management Audit Function

Management Audit Function
Management Audit Illustration (Image source: PxHere)

You already know the various audit objects in a management audit. From these seven objects, you must have known the main function of a management audit. This audit serves to determine performance and evaluate team performance in a company. Here are the functions of a management audit.

1. Improving Company Resource Management

The function of management audits is to improve resource management more effectively and neatly organized according to the needs of the company in achieving a target. Auditor will provide instructions and company steps in managing the company's resources that are more organized.

2. Improve Team Efficiency

Improving team efficiency is one of the functions of a management audit. With recommendations from auditors, team efficiency will be implemented faster in meeting a company's targets.

3. Helping Company Leaders Make Better Policies

Company leaders will be more effective in determining a team policy. The last management audit function is to provide advice regarding what company leaders should do regarding the team's future performance.

7 Management Audit Objects

From the definition of management audits in general, you can know that management audits are very functional to examine and analyze a movement in a team over a certain period of time.

Of course, an audit requires objects that can be used as audit references. Here are seven management audit objects that you can find in everyday life.

1. Organizational Structure of a Company

One of the audit objects in a management audit that auditors analyze is the organizational structure of a team in a company.

So that a company hierarchy, and also the working pattern of a team in the company based on the performance and involvement of all layers of the structure in achieving targets.

An auditor will provide advice from the investigation. If a company has a rather complicated organizational structure that slightly hinders the team's performance, the auditor will make suggestions to simplify the organizational structure.

In addition, the auditor also checks the company's financial statements based on this organizational structure.

If there is data in the financial statements that does not need to be in a hierarchy, the auditor will suggest removing the hierarchy from the structure or merging it with another hierarchy.

2. Rules and Procedures

Auditors will also investigate the rules and regulations that apply to a team within the company. If there is a regulation that the auditor thinks risks hindering performance or is unnecessary. Then the auditor will recommend the company to remove or revise the regulation.

For example, if there is a team with rules that enforce rules related to employee attendance that are less effective, the auditor will advise the company to make attendance rules with another model.

3. Risk Management Practices

A team within a company has practices risk management which varies. The task of a management audit auditor in this case is to investigate the risk management practices of the team.

If risk management practices are not effective, the team should revise its risk management practices.

4. Employee Relations

The auditor will advise the team to evaluate the relationship between employees in a team or division that is not appropriate or does not have a positive impact on company performance and achievements. So that the relationship between employees will still be maintained and oriented towards company achievements.

5. Financial Performance

A team's financial performance is essential to a company's performance. So the auditor will investigate and conduct related checks.

If there is ineffective financial performance for a company. Then the auditor will advise the company to cut unnecessary budgets and expenses.

6. Communication with Shareholders

Communication with shareholders is useful for providing information to external parties, especially investors to find out the development of the company and its performance.

If communication does not take place properly, it will cause losses to shareholders.

7. Human Resource Related Practices

The auditor will also investigate human resource management in managing human resources in a team in order to obtain information on whether the human resources of a team are in accordance with the company's achievements and targets.

Management Audit Stages

So from that, you know each management audit function has several functions that are useful for a company in achieving their mandatory targets.

However, these functions cannot be carried out without a gradual process. The following are the stages of a management audit.

1. Preliminary Stage

At this stage of the management audit, the auditor will investigate the background of the team in a company. Such as how the team was formed, how the process of selecting team members, and so on.

2. Review and Testing Phase

It is a stage of management audit that provides flexibility for auditors to test and review every aspect related to the team and team performance. Such as how the work patterns of each employee in a team, and so on.

3. Reporting Stage

After analyzing and knowing the problems and every ins and outs of the team's performance. The auditor will evaluate and provide some reporting notes on each aspect that does need a revision.

4. Follow-up Stage

This stage of the management audit is to provide some advice to the company based on these reports.

The auditor will generally provide a list and procedure of actions to be taken by the company leader regarding the team's future performance.

Closing

This is an explanation of management audits. You have explored the definition and seven objects that are the scope of a management audit.

These audits are instrumental in providing progress for team performance in achieving targets and also improving employee performance.

Well, you can find the management audit feature in Audithink. Audithink is trusted audit app with complete and sophisticated features that make it easier for auditors to perform various types of audits such as this management audit.

Schedule an app demo with our team to try out the features and functionality in the products we offer.

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