Short-Notes on PROPRIETY AUDIT

The term propriety means to compare and examine any specific activity to find
out whether it is in public interest ,is in accordance with commonly accepted
customs and standards of conduct.in this type of audit various actions and
decisions taken are examined to infer whether they are in public interest and
whether they meet the standards of conduct. It is not confined only to evaluate
the evidence in support of a transaction rather it attempts to examine regularity,
prudence and impact of various actions and decisions. Audit conducted by CAG is
an example of propriety audit.

The audit ensures compliance the following:-

(i) The expenditure should be within the demand of a particular occasion.

(ii) The expenditure sanctioned should not be a source of direct or indirect
benefit
(iii) Public money should not be utilised for the benefit of a particular
person or section of community.
(iv) Allowances are not on the whole source of profit to the recipient.
(v) The objectives of various plans are in harmony with the organisational
objectives
(vi) Whether every officer exercises the same vigilance in respect of
expenditure as a person of ordinary prudence would exercise in respect
to his own money
(vii) Whether technical estimates, detailed programmes and schedules are
properly framed and adhered there to.
(viii) Agreements ,contracts ,between control the organisation and other
parties are having some peculiar features or are providing undue
benefits
(ix) Adequacy of Budgetary control system as also of internal audit system.

Efficiency Audit

ObjectiveTo evaluate and ensure the overall efficiency of an organisation by

critically analysing and judging the effectiveness of the operational; controls, the
reliability of operational data provided by the management and the quality of
operational performance.

ConceptTo ensure investment in capital or other inputs flow into remunerative

channels .It ensures that investment gives optimum return.

The balancing of investment in different areas is designed to give optimum

return. Cost and benefit analysis is key to this audit.

Process

(i) Organisational environment is reviewed to diagnose operational

weaknesses
(ii) Resources flow into constructive and profitable channels
(iii) Measures and techniques are effective in attaining organisational
objectives.

(iv)Important facts in each of the functions are highlighted and analysed.

(v) Optimum return on capital invested in business operations are evaluated and
compared

(vi) Best possible ways to improve under optimal conditions are recommended

(vii) Adequacy of quality and qualification of personnel working in the

organisation

(viii) Tools and techniques applied in achieving the objectives are effective

Efficiency Audit includes:

(iI Strengthening the factors for survival and prosperity of business

(ii)Removing bottlenecks to achieve organisational objectives,

(iii)Reducing areas of uncertainty, inefficiency and ineffectiveness

(Vi) Safeguarding against causes of business failures.

(vii) Prepare sound planning and management control for future.

(viii)The efficiency and effectiveness of an authority in discharging his obligations

towards attainment of organisational objectives and will be included in the scope
of this audit.

MANAGEMENT AUDIT

Definition

Management Audit may be defined as comprehensive and constructive

examination of an organisation structure of a company, institution or branch of a
government, or of any component thereof, such as a division or department, and
its plans and objectives, its means of operation and its use of human and
physical facilities. ----William P. Leonards

Management audit may be more specifically defined as being an investigation

of a business from the higher level downwards in order to ascertain whether
sound management prevails throughout ,thus, facilitating the most effective
relationship with the outside world and the most efficient organisation and
smooth running internally-----Leslie Howard

Management Audit is performed with the object of examining the efficacy of the
information control system, management procedures towards the achievement
of enterprise goals

Churchil and Cyert

Management Audit can be defined as an objective and independent appraisal

of the effectiveness of managers and the effectiveness of the corporate structure
in the achievement of company objectives and policies. Its aim is to identify
existing and potential management weaknesses within the organisation and to
recommend ways to rectify these weaknesses-----CIMA Terminology

Concept of Management Audit

Organisational objectives and organisational functions:- An organisation is
established for accomplishment of certain objectives.