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

In the context of management reporting, which of the following best describes the principle of 'reporting by exception'?

Reporting by exception means communicating only those items where actual performance departs materially from the plan or standard. This lets managers concentrate on significant problem areas and take corrective action, instead of being overwhelmed by routine details that are proceeding as expected.

  1. AReporting only those items where actual results deviate significantly from plan or standard, so that attention is directed to themCorrect
  2. BReporting every transaction of the period in full detail to all levels of management
  3. CReporting only favourable variances to motivate managers
  4. DReporting only to external regulators when an exception is found in the statutory audit

Explanation

Exception reporting highlights significant deviations from budgets or standards so that managers focus on areas needing corrective action. Reporting every transaction defeats the purpose by causing information overload, and limiting reports to favourable variances would hide problems.

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