Management Audit As A Tool Of Achieving Organizational Objectives

Project and Seminar Material for Accountancy / Accounting

Management Audit As A Tool Of Achieving Organizational Objectives


This research work is conducted as part of the requirement for the award of a Higher National Diploma (HND) in financial studies (Accounting).

It highlights the authors effort in finding out the ways which management audit is used as a tool of achieving organizational objectives in our everyday organizations. organizational objectives

The entire work is divided into five chapters, chapter one is an introductory analysis of the topic, then the background of the study, significance, scope and limitation, the purpose and hypothesis. organizational objectives

The second chapter i.e chapter two dealt with the Literature Review and Theoretical consideration. Here related past works were reviews and the theoretical consideration on the present study was also brought into focus. As well as scope and nature of management audit and the result of auditing management. organizational objectives

Then, chapter three contains an explanation of how and where the needed information for the study was obtained and how the sample size was determined and the limitations encountered in the course of conducting the research. It also contains the method of investigation.

Chapter four dealt with the presentation and analysis of data collected during the field survey, after which the postulated hypotheses were tested.

Lastly, chapter five makes up the summary, conclusion and recommendations.

Chapter One

1.0 Introduction

In practice, there are two types of performance appraisal for instance, in appraising the lower level managers, majority of firms, utilized traditional performance appraisal technique. A check list and rating system were designed and the immediate supervisors make arbitrary assessments of performance though, the upper level management by objectives.

Secondly, the upper level managers performance is also evaluated. For example, when evaluating the performance of a district manager, say the performance of the district is evaluated and this because the determinant of the evaluation of the manager. Furthermore, the evaluation performance of management as a whole is usually based purely on an analysis, a financial accounting data exclusively.

One obvious reason for this occurrence is the lack of agreement on a reliable tools for measurement of performance of management other than with use of accounting data.

Recently, many have contended that, in order to appraise the value of management, calculations must be made in addition to those prepared for financial ratio analysis. It is in the context that management audit started as organizational objectives

1.1 Background of the Study

Management audit attempted to aid the management of the organization by providing it with information and analysis useful in the process of control.

According to Eze J. C. (2001) Management audit is an audit that evaluates the efficiency of management at all levels throughout an organization with a view to recommend improvement in areas where effectiveness is not assured. Management audit can also be significant in financial accounting area. For many years now, stockholders, financial analysis, potential investors and other interested parties have been concerned with the annual reports of major co-operations and the attached letter from the president of the corporation. The concern has been that though a financial audit of records of the company has been performed and opinion had been rendered. There was no additional method with the outsider could evaluate the performance of management in addition to evaluating the performance of the company. The theory of management audit parallels that of financial audit. The purpose of the audit is being the attestation of management’s representations by an independent examiner.

By attestation I refer to the reliability of management statement regarding its own decisions as proven by an independent third party. The auditor’s financial statement examines the performance of the company accountable to the stockholders of its decisions. On the basis of the financial statement, the shareholders or potential investors, evaluate the performance of the company in financial terms, net profit, earning per share etc.

Likewise, the management audit is a way of evaluating the performance of management in regard to the decisions made, the efficiency of its operating and the attainment of corporate goals. With the implementation of the management audit, the management of organizations would openly become more accountable for their actions to outside observers.

To this date, there has been little empirical research to determine the potential value of the management audit to users of the willingness of management audit process. However, the management audit concept, if carefully designed will prove to be a most important development in the management appraisal field, with a view to improving management efficiency. This research is intended to investigate the extend to which management audit is applied by organizations in Nigeria for example, in management performance evaluation, with a view to achieve this, delve into discussing management audit as a specialize aspect of audit in general. It will go further to explain the important of management audit in an organisation, the extent to which it is utilized by organization as a tool of improving management efficiency made. This research involves, library work, consultation of published professional journals, and periodicals, field survey on the project topic.

This work started with introduction followed by brief definition of some of the important terms the nature and scope of management audit, presentation of research findings, problem, prospects, recommendations, summary and conclusion.

1.2 Statement of Problem

There are so many problems which affect management Audit in the organizations inspite, other related problem of this study are those caused by poor internal control system, inadequate Training and Re-Training, Bad management, staff negligence, inadequate knowledge and experience of staff, security arrangement and use of sophisticated accounting machines and also poor remuneration.

A part from these, when appropriate recognition is not recorded to the Internal Audit department the status of the head of the department is always lower and therefore inferior to the states of the Head of Department. Heads of other Department regard the head of internal audit departments subordinate offer in power, authority and responsibility.

1.3 Objectives of the Study

Objectives of the study include:

  1. To ascertain if management audit assist the organization in achieving its objectives.
  2. To ascertain if there exist co-operation between management auditors and external auditors.
  3. To find out if management audit assists in the detection and prevention of fraud in the organization.

1.4 Research Questions

  1. Does management audit assist the organization in achieving its objectives?
  2. Does co-operation exist between the management auditors and external auditors?
  3. Does management audit assist in the detection and prevention of pilferage and fraud?

1.5 Statement of Hypothesis

Hypothesis One
  • H0: There is no relationship between management audit and organization.
  • H1: There is a relationship between management audit and organization.
Hypothesis Two
  • H0: Management audit does not assist in the defection and prevention of pilferage and fraud.
  • H1: Management audit assist in the detection and prevention of pilferage and fraud.

1.6 Significance of Study

The significance of this study can be viewed into two major aspects practical and academics. Practically, this study therefore may be of a special important to the following interest groups who may find the research beneficial.

  1. The management itself, who make the organization decision and policies.
  2. The stockholders and other interested potential investor.
  3. The general public who have right to be informed the activities of any such organization.
  4. The financial analysis.
Academic significance
(1) Students:

This research will enable students who intend to study the course in future to make use of the work both in their academics and research programs (reference purposes).

1.8 Definition of Terms

1. Appraisal:

It means to estimate the value or quantity of the management audit. In essence it refers to the estimation of value or quantity of job.

2. Arbitrary:

This is the reading a decision based on opinion or impulse only and not on reason.

3. Investors:

They are prospective business that are financial balanced with the intension to promote financial ability of a company.

4. Financial Statement:

This refers to annual balance sheet or statement of affair of an organization.

5. Management Audit:

Is also known as operations audit, serves as a yardstick for measuring the ability of the management and also to determine the objectives of the organization.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary of Findings

Based on the research carried out on the topic management auditing as a tool for achieving organizational objectives, the researcher discovered the following from the results of the questionnaire served and the hypotheses that:

  1. There is a relationship between the management audit and organization.
  2. Management audit has an annual audit plan.
  3. The annual audit plan is submitted to the organization.
  4. Management audit report is not acted upon by management.
  5. There is no co-operation between management auditor and the external auditor.
  6. Management auditor assists the external auditor in his investigation.
  7. There is cordial relationship between the management auditor and the external auditor.
  8. Management audit has up to date management audit manual.
  9. Management audit shares information on management audit manual to the external auditor.
  10. Management audit assists in the detection and prevention of pilferage and fraud.
  11. The presence of an management auditor acts as a check against fraud.
  12. The employment of an external auditor does not assist in the fight against pilferage and fraud.
  13. The fear of penalties helps in the check against fraud.

5.2 Conclusion

Based on the findings of our research work the researcher concluded that management auditing indeed serves as a tool to management for Household Products Company and all organizations generally. Although some areas are still weak, with some effort the management audit can improve and carry out its objectives in the organization.
However, management audit has severed as checked against fraud and other activities of the staff which is one of the objectives of the management audit and the findings have revealed, is a tool to management not only in one but in all organizations because of its findings, objectives, the significance to organizations is general.

5.3 Recommendation

From the findings and problems discovered, the researcher will like to make the following recommendations.

  1. The management audit unit of the organization should keep ethical standard by keeping up to date management audit manual and train its management auditors in forensic accounting.
  2. Management audit units should always draw annual audit plan which is the focus of the company as it will help them to have efficient operation.
  3. The management audit unit of the organization should always submit their audit plan to the management who will have to be pro-active and take action according to findings of the plan.
  4. The researcher recommended that the management on their part should acknowledge the report submitted to the management and allocate more power to the management audit to ensure independence.
  5. The management audit unit should endeavor to carry out their audit work to other departments which is not often visited.
  6. The management auditor of the company should be subjected to ethical standard so that external auditor will not do the work of management auditor or the work of an accountant so that cordial relationship should be maintained and external auditor may rely on the work carried out by the management audit of the company.

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Frequently Asked Questions

What is auditing and how does it work?

This, auditing is more a question of he hears but a whole process whereby the books of account and vouchers of business entities (including charities, trusts) are subjected to critical examinations by professionally qualified and independent account (Auditors) on such a detail as will enable them from an option as to their truth and fairness.

Is internal audit a tool or a watchdog?

Internal Audit as a Tools in Achieving Organizational Objectives. The notion of the auditor being bound or a watchdog is gradually changing for the better as internal auditing has undergone tremendous changes in recent past. The actual functions of the auditor is often surrounded in secrecy or held in some kind of awe.

What is the meaning of Internal Audit?

In that other management of various large business organizations and government concern recognized internal auditing as a valuable machinery in achieving and objective deemed accurate at a given point in time. The term “Audit” is from a Latin word “Audire” which means hr hears.

Are auditors bound or watchdogs?

The notion of the auditor being bound or a watchdog is gradually changing for the better as internal auditing has undergone tremendous changes in recent past. The actual functions of the auditor is often surrounded in secrecy or held in some kind of awe.

What is the role of Internal Audit within a business?

The role of internal audit within a business has undergone dramatic changes in recent years. Today, internal audit activities are considered as tools for value addition in forms of assurer, assessor and advisor.

What are the different types of Internal Audit?

This is particularly evident in the wide range of audit activities now undertaken by Internal Audit, moving from the standard operational and financial audits to now including business strategy, risk management effectiveness, value for money and governance type audits. Strategies to achieve Internal Audit Success?

How to attract and retain the right capabilities of Internal Auditors?

There are four main approaches internal audit can take to attract and retain the right capabilities: Internal Auditor rotation program – this allows internal auditors to rotate to other positions within the businesses for a period of time 

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