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

During a management audit, the auditor concludes that a firm's recommended improvements should be assessed on whether they are feasible, economically justified and acceptable to those who must implement them. Which limitation or challenge of management audit is being addressed by emphasising implementation acceptance?

The challenge is that management audit findings are judgement-based and advisory, so their value depends on management's willingness to implement them. Auditors therefore make recommendations feasible, economical and acceptable, since the findings carry no binding legal force on the board.

  1. AManagement audit has no recommendations to implement
  2. BBecause findings rest on judgement and are advisory, their value depends on management's willingness to act on themCorrect
  3. CManagement audit results are legally binding on the board
  4. DManagement audit can only be performed by the statutory auditor

Explanation

Management audit conclusions involve judgement and are advisory; no automatic legal force attaches to them. Their usefulness therefore depends on management accepting and implementing them, so auditors must make recommendations practical. Option C wrongly claims they are binding.

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