What is a Management Audit?

A management audit is an assessment of the capabilities of the management team of an organization. The analysis is intended to evaluate how well this group is able to achieve the objectives of the business. The audit may address strategic and tactical planning, decision making, the financial and operational results of the business, and risk management. The audit is not designed to evaluate the performance of individual managers. This type of audit is usually conducted by an independent third party, which provides its findings to the board of directors, as well as a set of recommendations and an implementation plan.

The board of directors may call for a management audit when they are contemplating a change in the management team or a redirection of the business. An acquirer may also use a management audit when it buys a business, to determine whether any changes should be made to the management team.

Who Conducts Management Audits?

A management audit is typically conducted by an outside consulting firm that specializes in this activity. It is not conducted by the outside auditors hired to audit a firm’s financial statements.