Sunday, May 11, 2014

Difference between Financial Audit and Management Audit

Financial Audit
Management Audit
Financial audit is the scientific and systematic examination of the books, accounts, vouchers and other financial records that will help the auditor to give opinion regarding true and fair view of the state of affairs of the business and to verify that profit and loss account reflects a true and fair view of profit or loss for the financial year.
Management audit is a method of independent and systematic evaluation of the management activities at all levels of management to ascertain the functions, efficiency . and achievement of the management (i.e. policies) as compared to standards set by the company.
 The scope of financial audit is given in the company's act, 1956. This audit is only relating to financial transactions, so its scope is limited.
 The scope of management audit is to asses the efficiency of the employees at all levers of management which is related to production, marketing, finance, human resources, sales etc, so its scope is larger than financial audit.
The person who conducts financial audit must have professional qualification, knowledge, skill, ability and expertise in the field of financial  accounting except in some cases where he may not be a Chartered Accountant.
The person who . conducts management audit should have a strong background in different l subjects and expertise in different fields in addition to financial matters.
Financial' audit generally starts  after the close of the financial year and after' making all accounts ready.
Management audit may be conducted at any time dependson the needs and circumstances.

Financial auditor gives opinion regarding true and fair view of the  financial position of the organisation.
Management auditor makes assessment of the overall efficiency at all levels of management and gives suggestions for improvement.
Financial audit is compulsory in Case of companies registered under companies act, 1956.
Management audit is not compulsory. It depends upon the need of management.