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CMA Final · Cost and Management Audit · Basics of Management Audit

During a management audit of a manufacturing firm, the auditor finds that the organisation structure has overlapping authority, with several managers giving instructions to the same team and no clear reporting line. Which management audit concern is MOST directly indicated?

The facts point to a weakness in the organising function, because overlapping authority and unclear reporting lines break the clear authority-responsibility relationship and unity of command. Stock valuation, GST deadlines and cost standard application are different matters that the described structural problem does not indicate.

  1. AWeakness in the organising function, specifically unclear authority-responsibility relationshipsCorrect
  2. BMisstatement of closing stock valuation
  3. CNon-compliance with GST return deadlines
  4. DIncorrect application of a cost accounting standard on overheads

Explanation

Overlapping authority and unclear reporting lines reflect a defect in organising, in particular the authority-responsibility relationship and unity of command. The other options concern valuation, tax compliance or cost standards, which are not raised by the structural facts given.

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