CMA Final · Cost and Management Audit · Management Audit in Different Functions
In a management audit of the production function, a plant shows a rising trend in rework and idle machine hours while output per labour hour remains on target. Which conclusion is most appropriate for the auditor?
Labour productivity alone is inadequate, so the auditor should investigate planning, maintenance and quality control weaknesses behind rising rework and idle machine hours. Management audit evaluates overall efficiency and causes of waste, so meeting one productivity target does not make the production function efficient.
- AThe function is efficient because labour productivity meets the target
- BThe finding is outside management audit scope because it relates to cost, not management
- CLabour productivity alone is an inadequate measure, and the auditor should examine planning, maintenance and quality control causing rework and idle timeCorrect
- DOnly the cost auditor should deal with it, and the management auditor should ignore it
Explanation
Meeting a single productivity target does not offset rising rework and idle hours, which signal weaknesses in production planning, preventive maintenance and quality systems. Management audit looks at overall efficiency and the causes of waste, so it cannot ignore these indicators.
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