Image via Wikipedia The word management used in context of a business involves many meanings. It refers to the act of management of the organization and the business to achieve its final goal. It also refers to an entity that is in charge of the day-to-day operations of the organization. A management audit involves verification of the hierarchy and distribution of power in the organization to determine whether it is best suited for achievement of the ultimate goal of the organization. A third-party must do the audit to avoid conflict of interest. The management conducting an audit of itself may come up with a self satisfying report that praises every decision taken and structure installed. On the other hand, opinion of a third-party may be completely different. The concept of management audit has become popular because people are realizing that having the right structure and procedure for management of the organization makes a huge difference to its productivity. There was a time when a firm with access to the cheapest source of raw material or labor would make the maximum profits in the past. Today, the firm that manages its resources best is the one that will make a profit. Considering the huge stakes that the masses have in the economy of the country and the fact that big corporations have a huge role to play in the overall economic development, it is not surprising that management audit is considered a social necessity. It ensures inefficiency in such corporations does not lead to losses for the entire country at large. … [Read more...]
Business Audit ? Why Involve 3rd Party Professionals?
Image via Wikipedia What is the harm in conducting an audit of one’s business without involving any third-party? Any and every audit involves verification of the subject of the audit. An audit of the financial statement involves verification of every bit of information presented in the same. There must be a logical link between each transaction and the ultimate results shown in the financial statement. There must be sufficient proof in the form of documentary evidence or paperwork. To conduct the audit without involving a third-party professional is obviously going to lead to loss of credibility. What is the guarantee that the management shall not convert the audit into a rubber stamp exercise which simply approves every decision of the management? A fraud conducted by the management itself will never be caught because the judge and the thief would be the same. It is important to hand over the task of audit to outsiders even when one is carrying out an internal audit or a management audit of a specific department or a specific process. Accountability is a very important issue when public money is at stake. A wrong decision by the management or a decision based on insufficient or irrelevant facts should be identified and remedied. The process may involve censuring the actions of certain people associated with the organization. To make sure that the process is impartial and credible, it is important to involve third parties. What is more, audit is a professional exercise and requires the services of people who have been specially trained to carry out such an activity. … [Read more...]
The Various Audit Results
The audits of business are nothing but the cross checking of the financial and the administrative claims made by the business house. The business audits can be conducted either by the business itself that is the internal audit or by some external auditing firm. Most of the business houses have a dual audit system that is the audit is conducted both by the internal members and as well as by the external vendors. It is compulsory for every registered business house which has public shares to conduct audits of its announced statements. The audit results of the business house provide a complete result about the financial and the administrative statement of the business house. The audit basically checks for the truthfulness of the announcements or the claims made by the business, the audit checks for the rights and the wrongs in the business. The audit results will provide with the detail of the actual taxes to be paid by the organization based on its actual business generated in the financial year, it checks and verifies for the actual taxes the organization paid. The audit results also evaluate the share prices of the organization again based on the financial statements and the balance sheets. The audits are like a check for all the internal and external errors caused or occurred in the financial and the administrative statements made by the organization. The internal audit is conducted by the people of the organization themselves to check in for the flaws and the mistake in the statements of the organization while in the external audit the auditing firms conduct an unbiased audit or check for the statements and then declare the results to the firm and all the bother parties or the clients involved in the organization. Many times the clients of the organization also conduct audits of the firm before or after providing business to the firm so as to check for its performance and efficiency in the given period of time. … [Read more...]