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.