MANAGEMENT AUDIT AS A TOOL OF ACHIEVING ORGANISATIONAL OBJECTIVES
(A CASE STUDY OF EASTERN NIGERIA PLASTICS)
ABSTRACT
This research work is conducted as part of the requirement for the Award of 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. The entire work is divided into five chapters, The information for the study was collected using primary and secondary methods of data collection. For the primary data collection, questionnaires, personal observations and oral interviews were used while existing literature relevant to the topic was consulted for the secondary data. The researcher used chi-square statistical model to analyze the data at the end of the research work the researcher made the following recommendations: statutory audits shouldbe given more attention with a view to solving the problems highlighted there in.
The organization controlling functions of management should be properly recognized and regularly appraised to detect the bottlenecks and remove the coy in the wheel of progress of the company.
TABLE OF CONTENT
Approval ii
Dedication iii
Acknowledgement iv
Abstract v
Table of content vi
List of tables ix
1.1 Background of the study 1
1.2 Statement of the problem 6
1.3 Objective of the study 6
1.4 Statement of Hypothesis 9
1.5 Research question 10
1.6 Significance of the study 11
1.7 Scope of the study 13
1.9 Limitation of the study 14
2.1 Review of related literature 16
2.2 Definition 17
2.3 Scope of Management Audit 18
2.4 Audit personnel 20
2.5 Purpose of Management 20
2.6 When to Audit Management 22
2.7 Issues in the management audit 23
2.8 Procedures/Techniques of management audit27
2.9 Problems of management audit 28
Reference
3.1 Research Design 33
3.2 Area of study 34
3.3 Population of the study 34
3.4 Sampling method 35
3.5 Research Instrument 35
3.6 Validity and reliability of research instrument37
3.7 Sources of Data 39
3.8 Analytical techniques 40
4.1 Presentation and analysis of data 41
4.2 Test of Hypothesis 84
5.1 Findings 89
5.2 Recommendation 93
5.3 Conclusion 94
Reference
Appendix
CHAPTER ONE: INTRODUCTION
1.1BACKGROUND 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. Management audit can also be significant in financial accounting area for many years now, stockholders, financial analysts, potential investors and other interested parties have been concerned with the annual reports of major co-operation. The concern has been that though a financial audit of records of the company has been performed and an opinion had been rendered, there was no additional method by which the outsider could evaluate the performance of management in addition to evaluating the performance of the company.
Accountants have been attempting to deal with the problem for some years now and many proposals have been presented of which management audit is the one that I think that has the greatest potential for the future. For both internal and external purposes, who are capable of appraising performance both for accounting data and management analysis. If this appraisal were made and an opinion rendered, the management audit would be of significant benefit to internal and external parties alike.
The theory of management audit parallels that of financial auditing.
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 statements regarding its own decisions as proven by an independent third party.
The auditor’s financial statement examines the performance of the basis of the financial statement, the shareholders or potential investors, evaluate the performance of the company in financial terms, net profits, 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. Though the management audit can be implemented to various extent, it would be a substantial aid to the evaluation and accountability of the management of organizations, governments and business alike.
However, the management audit concept, if carefully designed could prove to be a most important development in the management appraisal field, with a view to improving management efficiency.
The research also provide the extend to which management auditing is applied by an organizations and the extent is like an in house function aimed at putting management on their guard in readiness to the external appraisal put in place by the owners of the organization.
This research also provides some important of management audit in an organization, which include, assisting management in dealing prompting with some issue which would have created chaos or problem it left to linger until they come to the attention of owners. It also provide assistance to all level of management in the effective discharge of their responsibility by furnishing them with analysis, appraises, recommendation and comments concerning the activities reviewed and in that way, enable them improve their performance it also assist the organization with necessary information of great value for decision making in respect of the operation of the business.
1.2 Statement of the problem
There are multiple of issues and problem auditor encounter during auditing, that must be addressed individually.
1.Lack of adequate accounting system.
2.Lack of information
3.Ignorance as to the objective of internal auditing
4.Influencing auditor’s opinion through fraudulent means.
5.Fraudulent converge of international errors and criminal acts.
6.Lack of recognition.
1.3 Objective of the study
In some organization, management at times see no good reason for bothering with an audit of management itself. Such organization management may feel that the staff is doing best, so that an audit can’t help.
In some cases suggestion that the management audit be performed regularly would be regarded as insulting by those in charge. Infact, some managers, top, middle and low, have been out spoken against all attempts to evaluate their activities and those of their fellow staff members.
They have insisted that such appraised implies a lack of forth on the part of interested parties internal and external is an insult to their professional competence.
The above views cannot be justifies today as auditing of financial phase a business or agency.
Management audit does not imply suspicion that the controller or the accounting division or even the management is guilty of misrepresentation malpractice or inefficiency.
The objective of this study is to highlight or emphasized the ideal that on the contrary these review are undertaken necessary because much may be gamed from over all review. The strength as well as weakness may be noted. The need for added activity and support can be identified. Mistakes may be noted and deficiencies recognized and steps taken to remove them, in order to ensure improved management effectiveness and efficiency.
Infact, the management is aimed at showing that apart from the traditional interpretation and analysis of financial ratios, as a method of evaluating the performance of management, a comprehensive and detailed management audit, stands a better chance to influence an improved management efficiency.
The objectives of this study are therefore:
1.To investigate into the issue involved in the management audit.
2.To determine the extent to which the issue mentioned in above are applied in evaluating the management efficiency in any organization.
3.To analyze the degree of effectiveness of using the management audit as tool for improving management efficiency.
1.4 Hypothesis
a)If organization regularly carry out well planned and adequately execute management audit, the effectiveness of using it as a tool for improving management efficiency will made manifest (H1).
b)If organization regularly carry out well planned and adequately execute management audit, the effectiveness of using it as a tool for improving management efficiency will not be made manifest (Ho).
1.5 Research question
1.Does your company have good plan format which highlight the strengths and weakness of the management and the constraints of improving efficiency and objective?
2.How do you view the over all management of the company in relation to:
i. Are all the activities required to achieve objective properly created for?
ii. Are any necessary activities being carried out?
iii. Is there any avoidable duplicate of activities?
3.Is the planning related to objective of the management?
4.Does the budget estimates originates from various manager company?
5.Does the budget review staff from the lowest levels of management and in details?
6.Does the budget made easily understandable to the various levels of management?
1.6 Significance of Study
Hitherto, the evaluation of the management performance, has been usually based on an analysis of financial accounting data. Furthermore, there is lack of agreement on a reliable tool for the evaluation of the management performance and the level of efficiency.
This study therefore, may be of special importance in the following interest groups who may find the research beneficial:
1. The management itself, who make the organisation decisions and policies.
2. The stockholders and other interested potential investor
3. Financial analysis.
4. For the management, staff and the country’s economy as a whole.
For interested parties both internal and external.
5. The general public who have right to be informed of the activities of any such organisation.
Implementation of the research findings would help in recognizing more, and appalling management audit as a very effective tool for improving management efficiency.
1.7 SCOPE OF THE STUDY
This research work is designed to cover all issues involved in management audit, which is grouped under two broad areas, namely:
1. Management function auditing, which entails evaluation of the fields of planning, organizing, staffing, directing and controlling.
2. Management decision audit dealing with the quality of decisions in the areas of corporate and long range planning marketing, operations, personnel, accounting and finance.
The analysis was done on individual organisations basis and the results compared to arrive at the ultimate opinion of the researcher. A public limited liability company, whose legal and financial status affords the capacity and awareness of the derivable benefits from embarking upon the management audit exercise, is used as case study.
1.8 LIMITATION OF THE STUDY
Some limitations and delimitations occur while carrying out this research work.
Time factor was the major limiting factor to this research work as lectures were still on at the time most of this research work was being conducted.
This project started from (1970 – 2003) (33) years.
Time management and apportion become problematic as case study.
Another limitation was high cost of literature on the “Management Audit” as a specialized aspect of the general audit or financial audit of an organization.
Despite the above set back, the researcher laboured hopefully to the end of this work.
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