Distinguish between: Management Audit and Operational Audit

Auditing and Assurance Revision Questions and Answers

Answer
Management audit is an audit of the management. The management audit is, therefore, concerned itself with the whole field of activities of the concern, from top to bottom starting from the top, because we are primarily concerned with whether the general management is functioning smoothly and satisfactorily. Management audit is concerned with appraising management‟s accomplishment of organizational objectives, the management functions of planning, organizing, directing and controlling, and the adequacy of management‟s decisions and actions in moving towards its stated objectives.
Management audit is a complex task closely linked with the process of management. It usually involves the following steps:
 Identification of the objectives of the organization.
 The overall objectives are to be split down into detailed targets and plans for various segments.
 The organizational structure is to be reviewed to assess whether or not it can effectively achieve the overall objectives and detailed targets.
 The performance of each functional area or responsibility center is to be examined and compared with the targets and objectives.
 On the basis of above examination, a realistic course of action may be recommended.

On the other hand, operational audit is an audit for the management. It is undertaken at the instance of the management for providing it with information and appraisal of operations and activities. Operational auditing is essentially a review and appraisal of operations of an organization carried on a competent independent person. Hence, operational audit refers to a systematic independent appraisal activity within an organization for a review of the entire departmental operations as a service to management. Operations audit is a technique for regularly and systematically, appraising unit or function effectiveness against corporate and industry standards utilizing personnel who are not specialists in the area of study with the objective of assuring a given management that its aims are being carried out in identifying conditions capable of being improved.
Management audit deals with various aspects of the management process whereas operational audit is confined to various activities and operations in the functional areas. Management audit attempts to evaluate the performance of various management process and functions.



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