Discuss the relative merits of the different methods described in 16. 4 for the publication of the results of a management audit report.

Data from 16. 4

Management audits were introduced in the public sector to compensate for the lack of a profit motive to spur managers. This problem might not seem relevant to the private sector where badly run companies are in danger of being taken over. The shareholders can also remove the directors from office if the company’s performance does not match expectations. There is, however, a case for conducting a management audit anyway. The fact that a company’s results are reasonable does not mean that there is no room for improvement. Furthermore, management could be maximising short-term profits at the expense of the company’s future.

Langenderfer and Robertson have derived a model for an external management audit from the postulates of financial auditing proposed by Mautz and Sharaf.'! This assumes that a management audit should be a service to the shareholders and not management. This is based largely upon the apparent information needs of the users of financial statements, who are often more interested in non-financial measures of the performance of management.
The management auditor should be expected to evaluate management performance rather than measure it. This distinction is important because of the higher degree of objectivity and precision implied by measurement. The need for subjectivity is largely a result of the lack of standards against which to measure management performance. The fact that performance cannot be quantified objectively is not seen as a problem. It could actually be advantageous in that reports will have to be much more carefully written and the scope of the audit described in much greater detail than for financial audits.

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