The What, Why and How of Management Audit

 The most underrated yet most popular definition of the term money is “Money is what Money does.” Though it seems too simple crisp to core, the meaning it implies is of great importance. The definition gives one a fair understanding of the meaning, purpose and the power the word money holds in the world. If there is any other word or concept which can be described in such a way then that is Management. Without any second thought one can simply but elegantly define management as “Management is what management does.”

Management is one of the most common concepts known to mankind. Management is everywhere. The day in one’s life stars with management and ends with it. Though one person is not peculiar about the technical or in-depth meaning or working of management, it is found applied by all of us in our day-to-day life knowingly or unknowingly. That much management is entangled with the life of everyone. Management in common parlance can be described as the process of dealing with the day-to-day chores in one’s life. Whether it is getting up at a fixed time, going to bed at a fixed time, working for a fixed time, taking a bus, cooking or eating food, everything involves the process of management. Management is necessary in our day-to-day life or any task or venture we undertake.

However, Management in Business, though serves the same purpose, plays a different and more advanced role. Management is the process of planning and organizing the resources and activities of a business to achieve definite goals in the most effective and efficient manner possible. Management can be defined as the process of planning, organizing, staffing, directing and controlling such that the goals of the organization are achieved successfully with minimum cost and optimum resources. The Cambridge dictionary refers to Management as “the activity or job of being in charge of a company, organization, department, or team of employees.” But in a more accurate way, it is always better to say that, management is the activity done by a person in charge of a particular job or task to ensure the completion of it at a specified time, with the use of optimum resources at a reasonable cost, without diluting the quality of the work done.

The process of management relies mainly on the objective of the organization, the capabilities of the workforce and the environment it is implemented in. It is therefore essential to have a control/ supervision over the management as well. How effective the management of an organization is, defines the profitability, viability and sustainability of the organization and there by the economy as a whole. Even a small mistake from the part of the management will affect the organization seriously. It is where the concept of Management Audit comes in.

Management Audit in simple terms denotes the audit of the management. It is systematic review of decisions and actions of the management to analyse the performance of the organization as a whole. Management audit encompasses the evaluation of managerial aspects like organizational objective, policies, procedures, structure, control and system in place in order to check the proficiency or performance of the management over the happenings of the company. Unlike financial audits or cost audits, management audit mainly studies the non-financial data to review the efficacy of the management. Its efforts to search answer to the operational efficiency of the management by examining the process involved in it and the way how the management is performing the same.

The purpose of a management audit is to spot the areas of weaknesses of the management. Though it is most often carried out on an organizational level, it can also be carried out for certain business segments separately, considering the importance of the said segment in the organization. It helps one to find out how effective management is and where it need improvement. Human Resources, Marketing, Finance and Operations, Research and Development (R&D), Information Systems, and Corporate Structure, are some of the areas covered under management audit.

The process of management audit starts with data collection. However, it will consist of interviews with management and employees, examination of financial statements and performance, examining the company's policies and procedures and guidelines, evaluating the training programs in the organization, the hiring process, and many other areas within the organization. When the audit is complete, the auditor/ audit team will not only deliver its conclusions but will most often provide a complete strategy for the board of directors to implement so that the company can function at an optimum level.

When carried out effectively, the management audit provides valuable insight into how an organization can progress in its operations. It calls attention to areas where resources might be better allocated, where policies or procedures requires an updating, or a little training or support to the management in some areas. The product of such an audit is often improved transparency, responsibility and an inclusive performance within the management of the organization.

The audit of Management however requires certain commitments from the management as well as the auditor. The following aspects of management audit gives a good understanding of the need of the same in any organization.

Approach/ Applicability – The approach to management audit should begin from the top level. Management Audit serves as an opportunity to the top level to introspect the activities they were doing during the period under audit, how effective it was and whether any further changes/ corrections are required in the activities. Being said, the applicability of management audit does not end there. It should penetrate into the last level of organizational management to find out the problems, the constraints and the methods/ ways to solve them. The Nexus between the top level and bottom level of management need to be addressed during the audit.

Understanding – The function of management audit aims at understanding the process involved in the organization, the measures taken by the management, the mechanism in place to control the chances of risk persisting on the organization and so on. Apart from that, the management also should have a basic understanding with regards to why management audit is required. The two-way understanding in this process helps to build a trust between the management and the auditor there by ensuring better results. Understanding that management audit is not a shoulder surfing but a firewall to prevent the organization from various harms it may face in the future, will ensure a smooth and efficient audit which in turn helps in attaining the organizational goals.

Data – Data is the life blood of today's world. Without data no single work can be done effectively and efficiently. Data serves as the source of every decision being taken. Ensuring that sufficient, correct and complete data is being provided to the auditor is the responsibility of the Management, because any defect in the data will affect the decision made by the auditor which in turn will create difficulty for the management itself. Simultaneously, the auditor must ensure that the data provided is appropriately utilized when drawing conclusions. It is also the responsibility of the auditor to show utmost care to the data presented to them and to safeguard any data which is confidential.

Investment – The biggest mistake many organizations make is booking the management audit as an expense. Most of the organizations turn their back to implementing the management audit in the organization thinking about the cost/ expense it's going to incur in doing so. But it is necessary to understand that a management audit is not an expense to the organization but an investment. It is like health insurance. The chances of one being admitted in a hospital and having to bear a huge medical expense is very minimal, however it is always a good decision to make yourself insured. That way, one can feel relaxed hoping that though the risk still exists, there is a cushion to fall on to. Management audit helps one to understand the future risks, though to an extent only, and helps the organization to cushion up while facing the same.

Testament – Testament refers to something that serves as a sign or evidence of a specified fact, event, or quality. Management audit is the testament of the effectiveness of a management. It ensures that the management is not only performing well but also reaching a level, which guarantees the achievement of organizational goals. It evaluates and gives a clarity on how better the management is performing, whether there are any areas which need improvement and the ways in which the improvement can be brought in.

No organization is invincible, no organization is so powerful to foresee or to prevent the inevitable. Every organization at some point of time may have faced/ will face some kind of hurdles which they never imagined happening. The purpose of management is to ensure the organization a plan of action to tackle the same and to move forward. The management to do so requires constant support and supervision. Management audit is that tool which ensures the organization’s management is performing to their optimum capacity. Management audit helps the organization in meeting its objectives, by inspecting its overall performance and suggesting improvements, wherever required. Every organization, to attain its goals in the long run requires to introspect into its management and its objectives. Considering management audit an obligation creates an impression as it is not a necessity. Management audit is not just an obligation, it is a responsibility as well as a requirement. It gives more strength to the management. Ensuring the organization is equipped with a proper management audit programme is like securing one’s future with an insurance. Remember, precaution is better than cure.

Money Dysmorphia and its Aftermath

 “The influence of social media is astonishing. It's disheartening to see the false life that some people live.”

Social media is a widely used term for internet sites and applications that we use daily to share the content we create. No single morning starts without scrolling through the feeds of Instagram, WhatsApp, or Facebook. Such is the influence it has on each one of us. Social media has been a great boon, helping many of us explore our creativity, connect with old friends, keep entertained, and learn a lot of new things. Social media, therefore, is a big part of all our lives.

While it is understandable that social media is of great help, the cons also need to be addressed. The more one delves into the depths of social media—seeing updates on the food someone ate, the places they visited, the physical appearance of an influencer, or the lifestyle of an actor or actress—everything one sees leads to self-comparison and self-doubt. The idealization of life as seen on social media creates a sense of inadequacy and anxiety, particularly among the current generation, the millennials and Gen Z.

We are living in a society where our actions are constantly observed. Every place we visit, every meal we have, and every moment we spend with our loved ones is posted on social media to remain active and visible to the world. However, we are also victims of comparisons. Instead of enjoying the quality time spent with our loved ones or appreciating the places we visit, we constantly compare ourselves and our achievements to those of social media influencers.

Today's generation is more free, self-reliant, and independent compared to their parents. They hold their own views on every aspect of their lives, from marriage and education to job, career, and finance. However, they are often more cash-strapped than their parents. By the middle of the month, many find themselves financially strained, not because they aren't earning, but because they are spending beyond their means. The overuse of credit cards to cover expenses, the urge to spend on extravagance, and the constant desire to stay in the limelight or emulate the lifestyles of social media influencers are the primary reasons for this.

Money Dysmorphia, though not an actual diagnosis, has been circulating around the internet for some time. Money Dysmorphia refers to a state of mind where a person feels irrationally insecure about their finances, even when they are financially stable. According to Lindsay Bryan-Podvin, a certified Financial Therapist, “Money Dysmorphia is the distance between a person’s perceived financial status and their actual financial reality.” This distorted view of one’s finances often leads millennials and Gen Z to make ill-informed and dangerous decisions. A recent study reveals that nearly half of Millennials and Gen Z are affected by this condition.

The study sheds light on the extent to which young people are fixated on the lifestyles of the influencers they follow on social media platforms and how they feel compelled to project an image of wealth, often beyond their means. The pressure to uphold this social status is, however, creating serious mental health issues, affecting not only individuals but society as a whole. With the advent of social media, we are more aware than ever of others' spending habits.

The concept of Money Dysmorphia can be classified into 3 categories, namely Earning Obsession, Money Hoarding and Adverse Shopping

1.      The group of people who though are wealthy have the constant urge to earn more as they feel they are poor is called as Earning Obsession.

2.      The loath type who has money but will not spend, is called Money Hoarding.

3.      Adverse Shopping is where despite your financial constraints, you’re compelled to buy expensive and unaffordable items.

While the first and second category may seem harmless, the consequences of the third category are not limited to the individual affected by the disorder. The impacts are far-reaching. Constantly feeling the urge to match the financial status of someone you have no real relationship with, just because you saw it on social media, can lead to the adoption of a violent and criminal mind-set.

One of the most adverse effects of Money Dysmorphia is Money Mules. A Money mule is someone who transfers or moves illegally acquired money on behalf of someone else. Innocent victims are duped by fraudsters into laundering illegal money via their bank accounts, thereby making it complicated to determine the source. Recent studies show that the targets of money mules are mostly youngsters (Millennials or Gen Z) who are more vulnerable, naïve and strapped for cash, compared to their elder generation, due to the extravagant lifestyle they are trying to imitate. The charm of an opulent lifestyle preserved on platforms like Instagram has played a crucial role in shaping the financial aspirations of the younger generation. Being attracted to the financial gains or rewards offered by the fraudsters many are getting boarded into such illegal activities. A chunk of the accounts operating for carrying out money mule activities are found to be opened in the name of college/ school students who are eager to earn money through short-cuts and are interested in living a lifestyle way above their financial stability. Unaware of the implications and repercussions of their involvement they are making themselves the prey of such fraudsters. Of late, cases of heinous crimes such as drug trafficking, smuggling, kidnapping and murder are also seen followed by youngsters who are ready to do all means to ensure the maintenance of their social status indicating the seriousness of the disorder among the public.

Overcoming money dysmorphia is not an easy task, but it is also not insurmountable. By taking proper measures, such as monitoring one's finances, setting realistic goals, and creating a practical financial plan, individuals can overcome this disorder. Recognizing the problem is the first step to managing it. By doing so, individuals can pinpoint what leads to their disordered relationship with money. Fear and misconceptions can be reduced by educating young people about financial matters. Creating a monthly budget can help manage money dysmorphia by providing a clear overview of income and expenses. Most importantly, reducing screen time and controlling social media presence can decrease the urge to overspend, as the fixation on the lifestyle of others on social media is a primary cause of money dysmorphia.

A new concept called "loud budgeting" has been introduced by TikToker, comedian, and writer Mr. Lukas Battle. Although initially presented as a joke in one of his TikTok videos, it has sparked a new financial trend. Loud budgeting encourages individuals to be vocal and proud about achieving their financial goals. It stands for being unapologetic about personal finances, taking a proactive and transparent approach to managing money. In a workplace setting, loud budgeting involves collaborating as a group to develop financial goals and a shared spending plan, seeking and providing input on financial decisions, and openly sharing financial information. It can have a positive impact on the financial transparency of an organisation.

Money Dysmorphia can be overcome through collective efforts. Let us ensure that the future generation is not trapped in debts or become pawns in the hands of fraudsters.