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CMA Final · Cost and Management Audit · Management Reporting Issues and Analysis

In the context of management reporting, which characteristic best describes an exception report?

An exception report highlights only items that deviate from a predetermined standard or tolerance, enabling management by exception. It saves managers' time by directing attention to significant variances rather than presenting every transaction or routine result.

  1. AIt lists every transaction of the period in chronological order
  2. BIt highlights only those items that deviate from a predetermined standard or tolerance limitCorrect
  3. CIt is prepared only once a year for statutory authorities
  4. DIt compares the firm with competitors in the same industry

Explanation

An exception report works on the principle of management by exception: it flags only significant deviations from plans, budgets or standards so that managers can focus attention there. Listing every transaction describes a detailed ledger or journal listing, not an exception report.

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