Test: Controlling - 1 - Commerce MCQ

An efficient controlling system helps in achieving all the aforementioned objectives. Controlling refers to the process of assessing the progress of the current tasks and activities and setting the work standards to achieve the goals of the organisation. An efficient control system helps in keeping a close watch on the progress of the work towards the accomplishment of the organisational goals and takes the required corrective actions. It helps in tracking the changes taking place in the organisation and the business environment and thereby, helps in judging the accuracy of the standards set. Along with this, controlling boosts employee morale by telling them in advance about what is expected from them and motivating them to work according to the set policies.

Controlling as an essential part of management is forward as well as backward looking. It is a backward looking function in the sense that it assesses the work done and analyses deviations from the set standards. Based on these deviations it attempts to take the required corrective measures. Thus, it guides the future course of action and aims at improving the future performance. In this sense, it is also a forward looking function. Hence, we can say that controlling is forward as well as backward looking function.

Management Audit and its Purpose
- Management audit is a technique used to assess and evaluate the performance of the management of a company.
- The purpose of a management audit is to identify strengths, weaknesses, and areas for improvement in the management practices and processes of a company.
Key Components of a Management Audit
- Structure and Organization: The audit assesses the organizational structure of the company, including the roles and responsibilities of the management team.
- Decision-Making Processes: The audit evaluates the decision-making processes followed by the management, including the involvement of key stakeholders and the use of data and analysis.
- Communication and Collaboration: The audit examines how effectively the management communicates and collaborates with employees, shareholders, and other stakeholders.
- Performance Evaluation: The audit assesses the performance evaluation methods used by the management to measure the effectiveness of their strategies and initiatives.
- Risk Management: The audit evaluates the management's approach to identifying, assessing, and mitigating risks that may impact the company's performance.
- Financial Management: The audit examines the financial management practices of the company, including budgeting, cost control, and financial reporting.
Target Audience of a Management Audit
- The primary target audience of a management audit is the management team of the company.
- The audit helps the management team to identify areas for improvement and make informed decisions to enhance their performance.
- The audit also serves as a tool for the board of directors and shareholders to assess the effectiveness of the management team and hold them accountable.
Conclusion
- A management audit is a valuable tool to assess and evaluate the performance of the management team of a company.
- It helps in identifying areas for improvement and making informed decisions to enhance the overall performance of the company.

Budgetary control technique of managerial control involves the preparation of budgets for each operation of the organisation and then comparing the realised results with the budgetary standards.  budget is a quantitative statement defining the objectives to be achieved in a specified time period and the policies to be followed.

Accounting centre is not a part of responsibility accounting. Responsibility accounting basically refers to a system in which different divisions of the organisation are established as responsibility centres. Herein, each department is given a set target and the head of the department (manager) is made responsible for achieving it. They are of different types of responsibility centres such as cost centre, investment centre, profit centre and revenue centre.

Traditional Techniques are:

• Personal observation
• Statistical reports
• Break-even analysis
• Budgetary control

Modern techniques are:

• Return on investment
• Ratio analysis
• Responsibility accounting
• Management audit
• PERT & CPM

A cash flow statement is a financial statement that provides total data regarding all cash inflows a company receives from its ongoing operations and external investment sources. Hence, cashflow statemen is not a technique of planning.

Management control is done by the Managers at all levels:
- Top-level managers: These managers are responsible for setting the overall direction and goals of the organization. They develop strategic plans and policies and are involved in decision-making at a higher level. They exercise management control by monitoring the performance of the organization as a whole and ensuring that it aligns with the strategic objectives.
- Middle-level managers: These managers are responsible for implementing the strategies and policies set by the top-level managers. They coordinate the activities of different departments or units within the organization. They exercise management control by monitoring and evaluating the performance of their respective departments or units and taking corrective actions if necessary.
- Lower-level managers: These managers are responsible for supervising the day-to-day operations of the organization. They are directly involved in managing the employees and ensuring that the tasks are completed efficiently. They exercise management control by monitoring the performance of their subordinates, providing guidance and feedback, and making sure that the work is carried out according to the established standards and procedures.
Therefore, management control is carried out by managers at all levels of an organization to ensure effective performance and attainment of organizational goals.

Planning is the mental process whereas controlling isteh practical aspect. Controlling process works on the achievement of the objectives set in the planning process.  Controlling is a process of comparing the actual performance with the set standards of the company to ensure that activities are performed according to the plans and if not then taking corrective action.

Techniques of controlling:
There are several techniques of controlling that organizations use to ensure effective management. Among them are:
1. Managerial Audit:
- Managerial audit involves evaluating the performance of managers and their adherence to organizational policies and procedures.
- It helps identify areas of improvement and ensures that managers are accountable for their actions.
- Managerial audit can be conducted through various methods, such as performance evaluations, feedback systems, and regular monitoring of managerial activities.
2. Break Even Analysis:
- Break even analysis is a technique used to determine the point at which a company's revenue equals its expenses, resulting in neither profit nor loss.
- It helps in assessing the financial feasibility of a project or investment.
- By analyzing the break even point, managers can make informed decisions regarding pricing strategies, cost control, and resource allocation.
3. Budgeting:
- Budgeting is the process of setting financial goals and allocating resources to achieve those goals.
- It involves preparing a detailed plan of expected income and expenses for a specific period.
- Budgets serve as a benchmark for controlling expenses, monitoring financial performance, and ensuring that resources are utilized efficiently.
4. All of these:
- All the mentioned options, managerial audit, break even analysis, and budgeting, are techniques of controlling.
- Each technique serves a different purpose but contributes to the overall control mechanisms within an organization.
In conclusion, the correct answer is D. All of these techniques, namely managerial audit, break even analysis, and budgeting, are used for controlling purposes in organizations.

The first step in Control Process:
Determination of Smart Standards:
A standard means a benchmark. It means a specific set of factors relating to any organization, indi­viduals, or groups of individuals working in departments or divisions of an organization. A standard should be SMART, meaning Specific, Measurable, Achievable, Realistic and Time-based.