PART II – Management Audit: Basic Standards, Values and Norms

Shared byPratap Kumar Pathak

Standards of Management Audit

• Standards are principles-focused, mandatory requirements for ensuring professional practice of examination of management.

• Standards prescribe the norms of principles and practices, which the top management and management auditors are expected to follow in the– Planning the audit– Selection of organization or function to be audited– Formation of management team– Guidelines and criteria for assessment and examination– Benchmark of ethics and morality– Professional accountability– Quality of audit results

Standardized Management Audit

Management Audit

Independent and Fair

Evidence-based

Transparent and

Accountable

Decentralized and

Delegated

Participative and

Collaborative

Continuous and Objective Improvements

Professionally competent

Legitimate

Purpose of Management Audit Standards

• Delineate basic principles that represent the practice of management audit

• Provide a framework for performing and promoting a broad range of value-addition

• Establish the basis for the evaluation of management audit performance

• Foster improved organizational processes and operations

Relevance and Application of Management Auditing Standards

• Provide framework for performing high quality audit and compliance to standards is expected to ensure that a high quality of audit is performed and communicated with results.

• Auditing standards apply to both the management auditor and audit institution as well as in the whole exercise of audit.

• Standards ensure legitimacy of management audit system.

Management Audit Standards

Attribute Standards• Purpose, authority and

responsibility• Independence and

objectivity• Proficiency and due

professional care• Quality assurance and

improvement

Performance Standards• Strategy and plan• Performance

capacity• Examination• Reporting• Accountability• Supervision and

monitoring

Ethical Standards• Code of ethics• Code of conduct• Management of

conflict of interest

• Management of relationships

Different Components of Management Audit Standards

Standards

Basic Principles

Field Standards

Reporting Standards

General Standards

Standards of Management Audit

Standards

Planning Standards

Institutional Standards

Standards of Auditor

Examination Standards

Reporting Standards

Basic Principles• Legality• Regularity• Economy• Efficiency• Effectiveness• Autonomy• Independenc

e

General Standards• Professional

competency of auditors

• Relationship of the auditor with the audit institution and audited organizations

• Ethical and moral standards

Field Standards• Framework for

the purposeful, systematic and balanced steps

• Rules of investigation to achieve a specific result

• Proper supervision of audit process and review of quality

• Reliability, adequacy and sufficiency of information

Values and Morals of Management Audit

• Values are the rules of management audit by which audit organizations and auditor/s make decisions about right and wrong, should and should not, good or bad, feasible or infeasible, and so on with respect to standardized management audit.

• Morals have a greater social element to values and tend to have a very broad acceptance of audit. These are the people’s fundamental beliefs and motivational basis for ethical judgment in social and professional conditions of management audit.

Core Values of Management Audit

Values

Accountability

TransparencyParticipation

Quality

Improvement

Value of Management Audit for Stakeholders

Value orientation

Political leadership -

Policy

Tax Paying Community –

Resource utilization

Market – Delivery and Satisfaction

Citizen as Clients -

Satisfaction

Management Audit

Assurance

ObjectivityInsight

Assurance

Governance

Objective controlManagement of risks

Insight

Catalyst

AnalysesAssessments

Objectivity

Integrity

Competency

Independence

Accountability

Ethical Framework of Management Audit

• Professional ethics: Utility, objectivity, fairness• Performance ethics: Delivery of standardized and

ethical performance• Political ethics: Political neutrality, impartiality and

fairness• Developmental ethics: Right approach, priority and

allocation of values for betterment• Innovation ethics: valuing innovation and creativity• Service ethics: Effective service delivery with public

service motivation• Relational ethics: Managing professional relationships

during management audit

Delivery of Public Value in Management Audit

Public Value

Quality Assurance of Outputs

Behavioural response for

Performance and Delivery

Objective/Rational use of power and

resources

Empowerment of Stakeholders for

Meaningful EngagementCompetent and

Professional Management

Services

Normative Framework of Management Audit

• Norms are for maintaining professional standards of intent, process and outputs of management audit

• Norms build legitimacy, validity and recognition of management audit system

Norms of Selection Management Audit

• Intensity of risks• Political and public concern• Materiality and significance• Visibility• Past audits and seriousness of concern• Estimated impacts• Stage of programme or project development

and implementation• Coverage of importance

Types of NormsNorms of Management Audit

Descriptive and Injunctive Prescriptive and Proscriptive Subjective

Scope of Ethics in Management

Audit

Normative Ethics

Meta EthicsDescriptive Ethics

Applied Ethics

Norms of Assessment

Good Policy• Formulation of clear,

evidence-based, predictable and consistent policies

Good Management• Competent

organization and management

• Result-based management

• Performance management

Good Result• Sufficient services are

delivered• Services reach the

intended target group• Services are delivered

on time• Service results lead to

the achievement of policy

• Ensure value for money

Factors Determining Ethics in Management Audit

• Personal capability• Family influences• Religious values• Personal standards and

needs

• Policies and strategies• Performance systems• Codes of conduct• Accountability mechanism• Disciplinary measures• Participative management and

teamwork

• Global system and standards

• Governance capability• Norms and values of

society• Ethical climate of

profession

• Values and norms• Behaviour of leaders• Behaviour of peers and

subordinates• Group dynamics and

teamwork• Culture

Individual capacity and Willingness

Institutional capability

Socio-cultural environment

Organizational behaviour

Ethical Framework in Management Audit

Values• Rules for ‘right’ and ‘wrong’• ‘Should be’ or ‘should not be’• Emotion and belief

Morality • External exposure• Social description•Personal description•Response to society

Ethics • Internal exposure• Driving principles, values and norms• Drive and motivation

Ethics in Management Audit

Principled Ethics

•Values and intentions•Good principles lead to ethical behaviour and actions

Responsive Ethics

• Consequentialism• Result, impact and

outcome lead to ethical behaviour

• Accountability

Management Audit: Jurisdictional Norms

Jurisdictional Framework

Investigative

Jurisdiction Delegat

ive Jurisdic

tionAdministrative and

Punitive Jurisdicti

on

Developmental

Jurisdiction

Reformative and

Suggestive

Jurisdiction

Jurisdiction of Autonomy

Reporting Norms of Management Audit

Norms of Reporting Audit

Outcomes

Good Management Practices: Strategic

Planning, Performance Management,

Information System

Policy: Appropriateness, Evidence-based Predictability,

Implementability

Outputs and delivery:

Competitive and Efficient

Effectiveness: Results and Satisfaction

Accountability: Legal, Professional,

Market

Any queries….PLEASE

Thank you for kind attention