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THE USE MANAGEMENT AUDIT AS A TOOL FOR ACHIEVING ORGANIZATIONAL OBJECTIVE (A STUDY OF EBONYI STATE TRANSPORT CORPORATION (EBOTRANS), ABAKALIKI)

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CHAPTER ONE

INTRODUCTION

1.1     Background of Study

Management audit aids the management of an Organization by providing it with information and analysis, useful for the process of control. According to Eze, (2001) Management audit is an audit that evaluates the efficiency of management at all levels throughout an organization with a view to recommend improvement in areas where effectiveness is not assured. Management audit can also be significant in financial accounting area. For many years now, stockholders, financial analysts, potential investors and other interested parties have been concerned with the annual reports of major co-operations and the attached letter from the president of the corporation. The concern has been that though a financial audit of records of the company has been performed and opinion had been rendered. There is no additional method which the outsider could use to evaluate the performance of management in addition to evaluating the performance of the company. The theory of management audit parallels that of financial audit.

The purpose of the audit is being the attestation of Management’s representations by an independent examiner.By attestation, it refers to the reliability of management statement regarding its own decisions as proven by an independent third party. The auditor’s financial statement examines the performance of the company accountable to the stockholders of its decisions. On the basis of the financial statement, the shareholders or potential investors, evaluate the performance of the company in financial terms, net profit, earning per share etc. Likewise, the management audit is a way of evaluating the performance of management in regard to the decisions made, the efficiency of its operating and the attainment of corporate goals.

A major challenge in implementing a management audit, therefore, is related to the selection of audit personnel. The auditors, of course, must be competent in background, experience, and professional ability. But in addition, they must demonstrate an ability to deal successfully with human relations problems. In other words, they must be able to objectively appraise the actions of others without generating undue suspicions and, thereby, adding to a set of already strained conditions. As already noted, the natural feeling of someone being audited is one of defensiveness; i.e., the auditors are working for the boss who is “out to get me.” This attitude must be avoided. To do so, the better auditors will establish a pre-audit condition expressing their willingness to discuss their evaluation with the affected personnel before it is reported to higher management. In many cases this will evolve into a negotiation-discussion process whereby those concerned begin to view the audit as a way in which weaknesses may be pinpointed and their performances (and rewards) improved.

Most management decisions are based on financial quantitative and qualitative information obtained from the record of the business for best decision, therefore, the information must be relevant, timely and accurate. Hence, in order to prevent friction and ensure the smooth running of the organization, there should a clear structure of authority defining the responsibilities of each official or department special duties should be assigned to staff with the relevant skill and performance. To prevent bottleneck in the procedures a definite arrangement should be made for staff to take their annual vocation to replace those who are absent. It is in the process and context that management audit starts. With the implementation of the management audit, the management of organizations would openly become more accountable for their actions to outside observers. To this date, there has been little empirical research to determine the potential value of the management audit to users of the willingness of management audit process. However, the management audit concept, if carefully designed will prove to be a most important development in the management appraisal field, with a view to improving management efficiency.

This research is intended to investigate the extent to which management audit is applied by organizations in Nigeria for example, in management performance evaluation, with a view to achieve this, delve into discussing management audit as a specialize aspect of audit in general. It will go further to explain the important of management audit in an Organisation, the extent to which it is utilized by organization as a tool of improving management efficiency made.

1.2     Statement of the Problem

In the system of Organizations, management audit is not only intended to maintain an adequate method of processing accounting data, but also to safe guard the company against possible financial loss due to fraud or errors.

Every management audit, no matter how badly needed or efficiently implemented, is likely to generate some human relations problems for the firm concerned. A generally receptive management attitude must exist throughout a firm if an audit is to prove effective. If an audit is imposed on the firm by a dictatorial management, the chances for success are small, indeed. Line management must not fear the audit nor look upon it as a threat to their job security. If such an attitude does exist, the audit is open to sabotage at numerous phases and the results, therefore, will be lacking in the needed credibility.

There is also the overriding need on the part of the management to ran the business in an orderly manner. There are so many problems which affect management Audit in the organizations in spite of other related problem of this study are those caused by poor internal control system, inadequate Training and Re-Training, Bad management, staff negligence, inadequate knowledge and experience of staff, security arrangement and use of sophisticated accounting machines and also poor remuneration. A part from these, when appropriate recognition is not recorded to the Internal Audit department the status of the head of the department is always lower and therefore inferior to the states of the Head of Department. Heads of other Department regard the head of internal audit department’s subordinate offer in power, authority and responsibility.

1.3     Objective of Study

The main aim of the research work is to critically examine the use Management audit as a tool for achieving organizational objective, a study of Ebonyi State Transport Corporation (EBOTRANS), Abakaliki. While the specific objectives are outline below;

  1. To ascertain the impact ofManagement audit on the level of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.
  2. To find out if Management audit significantly improves the income level of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.
  3. To determine the impact of Management audit on efficiency and transparency on accounts record keeping in Ebonyi State Transport Corporation (EBOTRANS).

 

1.4     Research Question

  1. How does Management audit affect the level of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State?
  2. Does Management audit significantly improve the income level of Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State?
  3. How can Management audit be used to achieve efficiency and transparency on account records of Ebonyi State Transport Corporation (EBOTRANS)?

1.5     Research Hypotheses

Ho1: Management audit does not significantly affect the level of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

HA1: Management audit significantly affects the level of fraud and misuse of funds in Ebonyi State Transport Corporation (EBOTRANS) in Ebonyi State.

Ho2: Management audit does not significantly improve the income level of Ebonyi State Transport Corporation (EB

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