BOOK REVIEW: OPERATIONAL PROFITABILITY--CONDUCTING MANAGEMENT AUDITS
Published by John Wiley & Sons, Inc. 260 pages $95.00
As this book points out, a management audit is an in-depth review of the individual parts of a business. In effect, it provides valuable data on operational efficiency and an additional service opportunity beyond the usual audit. The management audit goes to substantial depths in analyzing a client's efficiency, especially where inventories are a substantial factor. It brings up the strong and weak points and frequently provides the basis of helpful recommendations.
The functions of a management audit are covered in eleven chapters--the business approach; building the organization from the bottom up; financial ratio analysis; impact of the seven causal ratios on the nine secondary ratios that measure effect; cash flow and break-even analysis; inventory; operations: operational efficiency measures; reducing operating costs: inventor controls; and production, planning, and control. The chapter captioned "the basic approach," well covers the starting points of a management audit and furnishes a checklist for a management analysis. It also briefly answers the question--how much work is involved? In addition, the chapter briefly covers setting up management analysis topics, such as forecasting, planning, execution, and reporting. The chapter headed "financial ratio analysis" covers the subjects of liquidity, profitability, and ability to manage and the seven causal and the nine secondary ratios that measure effect.
The chapter on inventory lists the advantages and disadvantages of the FIFO and LIFO methods of valuation.
Roger M. Torok, CPA, is vice president of the accounting firm of Zalick, Torok, Kirgesner, Cook, and Co. in Cleveland, Ohio. Patrick J. Condon is lead auditor at Omnex-Automotive Quality Systems Registrar Inc.
In your reviewer's opinion, this book provides much useful reading guidance for the performance of a management audit. *
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