4 keys areas in which management audit can be undertaken in cooperatives

Organisational Structure:

In a service institution like cooperatives, organisational structure should have a strong basis. The extent of accountability of each functionary, the areas of responsibility and the power of delegation at each level should be clearly spelt out.

A clearly defined organisational structure ensures tight system and procedures with minimum loopholes and gaps.


Management audit will have to focus on this and try to determine to what extent executives and managers at medium and lower level have utilised the authority vested in them. Remedial measures can consequently be suggested for appropriate delegation to achieve the desired results.

Decision making:

Correct and prompt decision making, can help in improving profit and services of cooperatives. Decision making comprises a series of acts at different levels in a hierarchy. Assessment of the quality of the decisions taken will have to take into account several factors-some controllable and some uncontrollable.

Though it is the effort of every organisation to appoint right man at the right position to ensure quality decision-making. It is not always possible. Management audit will have to take into account the executive caliber of people at different levels, especially in sensitive areas like personnel department, credit appraisal and public relation.


In credit cooperatives management audit will be required to ascertain as to what extent the power of writing off bad debts, sanctioning credit limit and various types of loans, settlement of disputes between banks and staff should be delegated to middle and lower level staff.

Management audit will examine situations critically and poet out faults and whether these are at top level or lower level. Finally this will help in deciding as to what extent power should be delegated to middle and lower level for effective and quick decision making.

The expectations of the clients of the bank regarding services to be rendered should be the guiding factor for delegating power. The audit should reach conclusions keeping in mind the capacity, capability and expertise of the person who has been delegated powers. It should also be able to assess whether failures are due to deficiency at individual eve or due to lacunae in organisational policies.

Human Resource Development:


The employees of a cooperative contribute significantly to its development. Hence if employees are expected to make tangible contribution it is necessary that their morale is kept high. Management audit should take into an account the morale is kept high.

Management audit should take into account the employee’s level of motivation, the infrastructure developed for personnel in the areas of training, promotional prospects and incentives available for exemplary performance.

A review of the cooperatives personnel policies in respect of transfer, placements and promotion will indicate the important areas where management audit may be conducted. Management audit will generate conducive atmosphere in the ‘Organisation by which good results will be ensured.

Financial Viability:


The present day problem of cooperative banks is primarily that of profitability and viability which calls for a definite orientation in management audit exercise. Cooperative banks business essentially comprises lending to non-farm sector and also agriculture financing.

Besides; these banks are required to undertake higher priority sector lending as compared to private an public sector banks, and also have to implement government sponsored programmes which affects their profitability.

Being placed in such a position the cooperative banks are a not able to extend desired lending services to their customers, and as a result they are not able to generate sufficient income beyond their routine earning of interest.

These banks could undertake the business of bills of exchange and foreign exchange also. With the help of management audit it is possible to determine at what level profitability is being eroded and what is the extent of cross-subsidization of non-viable services including opening of new branches.


Management audit can help to identity clearly factors which are contributing to the profitability and viability to the bank, as also those which are not making any contributions in this regard. The management and administrative costs should be analyzed thoroughly by the audit to apprise the management of the impropriety in expenses.

The total income of the bank should match its managerial, financial and administrative expenses and save a certain quantum as met profit.

Management audit is a very suitable device for suggesting remedial measures to improve the profitability and viability” of the bank. A factual and analytical management audit can be an effective test for stimulating action to correct the weakness underscored by the auditor.

Management audit will be able to pinpoint weakness in control and identify vulnerable areas for suggestion and improvement. The auditor’s task is not score points by adopting a fault finding approach but to deep the interest of the organisation in mind.