Management Auditing
The word audit can sometimes be daunting to even the most responsible and organized business owner. An audit can potentially expose issues related to safety, finances, and overall basic function. When defined, an audit can be described as an official inspection of an organization’s accounts and processes routinely conducted by an independent entity. Maybe one of the scariest parts about an audit is that it is usually conducted by an outside source and their findings often indicate how a company is running and functioning and includes details that the business owner may not even be aware of. In the business world there are often three different components associated with evaluating activity, they are inspection, compliance auditing, and management auditing.
Inspection
Inspection is pretty self-explanatory, this is where processes are reviewed, and characteristics such as function, fit and form are evaluated for effectiveness. The results of an inspection are often given in black and white as a pass or a fail. Either the company is passing the needed guidelines for the business or it is not.
Compliance Auditing
Now, this type of evaluation goes more in depth than just inspecting. Compliance auditing involves the checking and monitoring of items such as approved procedures, instructions and manuals as well as financial documentation. Many people associate compliance monitoring with taxes, because audits are typically conducted by tax professionals and banking institutions to ensure accuracy with both tax and income records. This is where some of the fright comes into play because a business is being held accountable for all of its practices, transactions and business dealings. If something doesn’t add up right the outsourced entity knows about it first even before the business owner.
Management Auditing
Management auditing is quite different than both inspection and compliance auditing, it focuses more on the internal aspects and most management audits are actually conducted internally. This type of audit looks primarily at effectiveness; it evaluates the current procedures in place and challenges them to see if they are as beneficial as they should be. Furthermore, management auditing is looking for results. This is not the type of audit to just make sure all systems and procedures are functioning properly, but instead it looks deeper into the business practices to see what changes can be made to make improvements within the company and its designated procedures. Some distinct differences between compliance audits and management audits are that compliance audits involve the auditor assessing whether requirements are being met and further emphasize stability while management audits focus on whether the actual requirements in place are effective and pertinent to the business taking place and therefore emphasize results.
Some helpful rules to follow when conducting a management audit include making sure the internal person conducting the audit is qualified to do so, this is important for the data and focus to be effective. Another measure to take is to also to assure that customers are being served to the best of the ability. We are not talking about external customers but instead the people within the business. All employees need to be made aware of processes that are working and what is not. By doing this communication will be improved as well as the lacking procedures. Furthermore, all results should be measured against specific and established criteria. The auditor should not be able to make-up or elaborate upon certain rules or guidelines instead the auditor should work will a set of agreed up standards.
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