Management audit refers to efficient evaluation of the general performance of the management of an organization. The purpose is to review the efficiency and effectiveness of management and to develop its performance in future periods. It is helpful in identifying the deficiencies in the performance of management functions. Thus, management audit may be defined as evaluation of the functioning, performance and effectiveness of management of an organization. However, management audit concentrates more on the inefficiencies and weaknesses of the management.

The main advantages of management audit are as follows.

  • It helps to locate present and potential deficiencies in the performance of management functions.
  • It helps to improve the control system of an organization by continuously monitoring the performance of management.
  • It improves coordination in the functioning of various departments so that they work together effectively towards the achievement of organizational objectives.
  • It ensures updating of existing managerial policies and strategies in the light of environmental changes.

Conducting management audit may sometimes pose a problem as there are no standard techniques of management audit. Also, management audit is not compulsory under any law.

Disadvantages of Management Audit

  • Management audit involves high cost and it is appropriate only to large organizations.
  • Management audit may create a fear in the minds of the executives and may curb their initiative and innovation.
  • The management auditor may lack independence and may simply take instructions from the top management.

However, an organization can utilize management audit effectively to improve its various functional areas.