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CMA Intermediate · Corporate Accounting and Auditing · Nature, Scope, Objectives and Significance of Auditing

Which of the following is an advantage of auditing for a company's management?

A key advantage for management is that auditing helps detect errors and frauds and acts as a moral check on employees, discouraging misappropriation. It does not relieve management of legal responsibility, guarantee profits, or eliminate the requirement to maintain proper books of account.

  1. AIt helps detect errors and frauds and acts as a moral check on the staffCorrect
  2. BIt makes the management free from all legal liability
  3. CIt guarantees an increase in the company's profit
  4. DIt removes the need for maintaining books of account

Explanation

Auditing acts as a deterrent, helping detect errors and fraud and strengthening internal control and accountability. It does not remove management's legal liability, guarantee profits, or replace books of account.

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