THE USE MANAGEMENT AUDIT AS A TOOL FOR ACHIEVING ORGANIZATIONAL OBJECTIVE
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THE USE MANAGEMENT AUDIT AS A TOOL FOR ACHIEVING ORGANIZATIONAL OBJECTIVE
Chapter One: Introduction 1.1 Background of Study
Management audits help an organization’s management by giving information and analysis that can be used in the control process. According to Eze (2001), a management audit is one that assesses the efficiency of management at all levels of an organisation with the goal of recommending improvements in areas where effectiveness is uncertain. Management audits can also be important in the financial accounting field.
For many years, stockholders, financial analysts, potential investors, and other interested parties have been concerned about major cooperatives’ annual reports and the attached letter from the corporation’s president.
The concern has been that a financial audit of the company’s records has been done, and an opinion has been issued. There is no other approach that an outsider could use to evaluate management performance in addition to reviewing firm performance. The theory of management audit is similar to that of financial audit.
The audit’s goal is to have an impartial examiner attest to Management’s representations.Attestation refers to the credibility of management statements regarding its own decisions as demonstrated by an impartial third party.
The auditor’s financial statement assesses the company’s performance and holds it accountable to the stockholders for its actions. The financial statement is used by shareholders or potential investors to analyse the company’s financial performance, such as net profit, earnings per share, and so on.
Similarly, a management audit evaluates management’s performance in terms of decision-making, operational efficiency, and achievement of company goals.
The selection of audit staff is thus a significant difficulty in carrying out a management audit. Of course, auditors must have the necessary background, experience, and professional ability. In addition, they must exhibit the capacity to successfully deal with human relations issues.
In other words, they must be able to objectively evaluate the actions of others without raising unnecessary suspicions and thereby exacerbating an already tense situation. As previously said, the natural reaction of someone being audited is defensiveness; i.e., the auditors work for the boss who is “out to get me.”
This mentality should be avoided. To do this, the better auditors will create a pre-audit condition declaring their willingness to discuss their evaluation with the impacted staff before reporting it to upper management.
In many circumstances, this will lead to a negotiation-discussion process in which those involved begin to see the audit as a tool for identifying shortcomings and improving their performance (and incentives).
Most management decisions are based on financial quantitative and qualitative information collected from the business’s records. To make the best judgements, the information must be relevant, timely, and accurate.
As a result, in order to avoid friction and maintain the smooth operation of the organisation, there should be a clear structure of authority identifying the tasks of each official or department, and unique functions should be assigned to personnel with the necessary skills and performance.
To avoid bottlenecks in operations, a formal plan should be created for employees to take their yearly leave to replace those who are absent. The management audit begins with the process and the context. With the implementation of the management audit, organisational management would become more accessible and accountable to outside observers.
To far, little empirical study has been conducted to establish the potential value of management audits to users of the management audit process. However, if properly constructed, the management audit concept will show to be a significant development in the management appraisal field, with the goal of boosting management efficiency.
This study aims to analyse the extent to which management audit is used by organisations in Nigeria, for example, in management performance evaluation. To do this, we will discuss management audit as a specialised element of audit in general.
It will go on to describe the significance of management audits in organisations and how they are used as a tool to improve management efficiency.
1.2 Statement of Problem
Management audits in organisations are not only meant to maintain an adequate technique of processing accounting data, but also to protect the company from potential financial loss due to fraud or errors.
Every management audit, no matter how desperately required or efficiently implemented, is going to cause some human relations issues for the company involved.
A typically receptive managerial attitude must exist throughout a company for an audit to be effective. If a dictatorial management imposes an audit on the firm, its odds of success are slim.
Line management should not be afraid of the audit or consider it a threat to their job security. If such an attitude exists, the audit is vulnerable to sabotage at many stages, and the results will lack the necessary credibility.
There is also an overarching need on the part of management to run the firm in an orderly fashion. There are numerous issues that affect management auditing in organisations, in addition to the other issues discussed in this study
such as poor internal control systems, insufficient training and re-training, poor management, staff negligence, insufficient knowledge and experience of staff, security arrangements and the use of sophisticated accounting machines, and poor remuneration.
Aside from these, when suitable recognition is not documented in the Internal Audit department, the status of the head of the department is always lower, and hence inferior to the state of the Head of Department. Other department heads value the subservient offer of power, authority, and responsibility from the head of the internal audit department.
1.3 Objective of Study
The primary goal of this research is to critically assess the use of management audit as a technique for accomplishing organisational goals in a study of Ebonyi State Transport Corporation (EBOTRANS), Abakaliki. While the precise objectives are outlined below:
1. Determine the impact of management audits on the amount of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.
2. Determine whether management audits considerably enhance the income level of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.
3. Determine the impact of a management audit on the efficiency and transparency of Ebonyi State Transport Corporation’s (EBOTRANS) accounting records.
1.4 Research question
1. How does management auditing affect the level of fraud and misuse of funds at Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State?
2. Does management audit greatly increase the income of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State?
3. How can a management audit help Ebonyi State Transport Corporation (EBOTRANS) enhance efficiency and transparency in its accounting records?
1.5 Research Hypotheses.
Ho1: Management audits had no substantial impact on the level of fraud and misuse of funds at Ebonyi State Transport Corporation (EBOTRANS).
HA1: Management audits have a major impact on the level of fraud and misuse of funds at Ebonyi State Transport Corporation (EBOTRANS).
Ho2: Management audits do not considerably increase the income of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.
HA2: A management audit increases the income of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.
Ho3: A management audit cannot be used to improve efficiency and transparency in Ebonyi State Transport Corporation’s (EBOTRANS) accounting records.
HA3: A management audit can help Ebonyi State Transport Corporation (EBOTRANS) enhance efficiency and transparency in its accounting records.
1.6 Significance of the Study
The study investigated management auditing as a strategy for accomplishing organisational goals using a case study of Ebonyi State Transport Corporation (EBOTRANS) in Abakaliki. As a result, this study will greatly assist the following groups:
Ø Government: Adopting and implementing strong economic policies can improve the operation of public corporations in Ebonyi State.
Ø THE MANAGEMENT: It will provide information for apex policymakers and management boards to fashion dynamic and reliable reforms and policies to accelerate the performance of firms through management audit, with Ebonyi State Transport Corporation (EBOTRANS), Abakaliki, as a case study.
Ø Investors: This study will help foreign, local, private, and public investors determine which sectors of the economy give the highest returns on investment in Ebonyi state.
Academic Field: This study will add to the literature on management audits as a technique to achieve organisational goals.
1.7 Scope of Study
The purpose of this study is to look at the use of management auditing as a technique for accomplishing organisational goals, using the Ebonyi State Transport Corporation (EBOTRANS) in Abakaliki, Ebonyi State.
1.8 Limitations of the Study
The study’s shortcoming, like many others, is that it is prohibitively expensive and has a limited time frame. The fact that the study was conducted as a study research project indicates the study’s diverse financial landscape.
Furthermore, the study has limitations in terms of financing, time, and data gathering. In terms of finance, the expense of transit in pursuit of data was prohibitively high.
On the part of time, the study was carried out alongside school activities. Furthermore, the time frame for conducting the research was limited, making a more detailed examination impossible.
Meanwhile, despite the aforementioned limitations or inhibiting elements, the study remains a distinctive compendium on the study of management audit as a tool for accomplishing organisational goals, using a case study of Ebonyi State Transport Corporation (EBOTRANS), Abakaliki.
1.9 Definition of Terms
Appraisal (also known as performance appraisal) is the process by which an employee’s progress, performance, results (and occasionally personality) are examined and assessed by his immediate superior and, in many cases, other senior managers.
ü Financial statement preparation is a necessary aspect of every organisation, regardless of ownership structure or type of economic activity. Because these statements reflect the company’s financial status and advancement. They are of interest to managers, owners, leaders, employees, and anybody who is interested in or concerned about the firm.
ü Investment: This includes other companies’ stock and bonds, as well as property purchased with the intention of a financial return.
ü Investors: These are prospective businesspeople who are financially balanced and intend to promote a company’s financial ability.
A Management Audit:A management audit is typically a subjective comparison of a detailed description of management duties to actual performance or company policy in relation to each issue.
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