What is a Management Audit?

A management audit is an assessment of how an organization applies its resources and its strategies.

How Does a Management Audit Work?

Let's say that Company XYZ wants to conduct a management audit. It decides that good management results in higher profits, happier employees and more customers. Accordingly, the board of Company XYZ sets three measures against which it evaluates management: growth in earnings per share (proof of higher profits), employee turnover (proof of employee satisfaction), and customer counts (proof of more customers).

Management audits are common during mergers, restructurings and bankruptcies. Good succession planning also involves doing management audits. From a strategic perspective, management audits also help companies identify weak spots and determine where they should add to or support existing managers.

Why Does a Management Audit Matter?

Management audits are not the same as individual performance reviews. Rather, the goal is to compare an organization's overall management quality to the rest of the industry and especially to competitors.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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