MANAGEMENT AUDITING - PATHWAY TO EFFICIENT, ECONOMICAL OPERATIONS

• NCJ Number: 65214
• Journal: Internal Auditor Volume: 35 Issue: 2 Dated: (APRIL 1978) Pages: 33-39
• Author(s): W L CAMPFIELD
• Date Published: 1978
• Length: 7 pages
• Corporate Author: Institute of Internal Auditors, Inc
• Publication Format: Article
• Publication Type: Report (Study/Research)
• Language: English
• Country: United States of America

Annotation

THE AUDITOR'S ROLE IN EVALUATING MANAGEMENT PERFORMANCE IS EXAMINED WITH REFERENCE TO THE NATURE OF MANAGEMENT AUDITING, KEY APPROACHES AND PROCEDURES USED, AND APPLICATIONS IN PRIVATE INDUSTRY.

Abstract

MANAGEMENT IS THE PROCESS WHICH COMBINES HUMAN AND PHYSICAL RESOURCES TO YIELD OPTIMUM ECONOMIC, POLITICAL, OR SOCIAL RESULTS. MANAGEMENT AUDITING (SOMETIMES CALLED OPERATIONAL AUDITING, PERFORMANCE AUDITING, OR INTERNAL AUDITING) HAS EVOLVED OVER THE PAST 20 YEARS AS A PROFESSIONALLY BASED REVIEW AND EVALUATION OF AN ORGANIZATION'S TOTAL ACTIVITIES FROM THE VIEWPOINT AND PERSPECTIVES OF MANAGEMENT. THE MANAGEMENT AUDIT'S GOAL IS THE SAME AS FOR A FINANCIAL AUDIT: TO FURNISH RELIABLE INFORMATION ON WHICH TO BASE DECISIONS. MANAGEMENT AUDITS INCLUDE FOUR BASIC STEPS: (1) PRELIMINARY SURVEY; (2) STUDY OF AUTHORIZED PROCESS; (3) STUDY OF POLICY, TEST OF ADMINISTRATIVE PROCEDURES, AND EXPLORATION OF WEAKNESSES; AND (4) REPORTING ON AUDIT RESULTS. REVIEWS OF MANAGEMENT REPORTS AND EARLY PHYSICAL INSPECTIONS ARE USEFUL IN IDENTIFYING POSSIBLE PROBLEMS. TRACING A NUMBER OF TRANSACTIONS FROM BEGINNING TO END IS A USEFUL WAY TO OBTAIN PRACTICAL INSIGHT INTO EFFICIENCY OF PROCEDURES. APPROPRIATE CRITERIA, USUALLY THOSE SET UP WITHIN THE ORGANIZATION, SHOULD BE USED TO MEASURE PERFORMANCE EFFECTIVENESS. AUDITORS MAY WORK WITH MANAGEMENT TO SET STANDARDS OF MANAGEMENT PERFORMANCE THROUGH A SYSTEM OF QUALITY POINTS, STANDARDS OF FINANCIAL PERFORMANCE, AND COMPARISONS OF PERFORMANCE WITH FORECASTS. THREE EXAMPLES FROM INDUSTRY (AUDITS OF LABOR CONTROL, A PERSONNEL DEPARTMENT'S OPERATIONS, AND A HYPOTHETICAL CAPITAL BUDGETING DECISION) ILLUSTRATE THE WAYS MANAGEMENT AUDITING CAN SERVE PRIVATE ENTERPRISE. THUSE, MANAGEMENT AUDITING CAN HELP MANAGEMENT FIND THE BEST OPTIONS FOR ACHIEVING EFFECTIVE, EFFICIENT, AND ECONOMICAL OPERATIONS, AND BY IDENTIFYING ALTERNATIVES AND STRATEGIES. FOOTNOTES ARE INCLUDED. (CFW)