CMA Final · Cost and Management Audit · Basics of Management Audit
Which of the following best describes the primary orientation of a management audit as compared with a financial audit?
A management audit evaluates how effectively management performs and decides, aiming at improvement and future performance. Unlike a financial audit, which checks the truth and fairness of past statements, it is a forward-looking, evaluative review of managerial effectiveness across functions.
- AIt verifies the arithmetical accuracy of ledgers for the past year
- BIt evaluates the effectiveness of management's performance and decision-making with a forward-looking, improvement focusCorrect
- CIt certifies compliance with the Companies Act only
- DIt examines only the cost records maintained under statutory rules
Explanation
Management audit is an appraisal of management's overall effectiveness in achieving objectives and is oriented to improvement and the future. Financial audit centres on the truth and fairness of past statements, which is why option A describes the wrong type of audit.
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