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CMA Final · Cost and Management Audit · Basics of Management Audit

Which of the following is generally regarded as a limitation of a management audit?

A recognised limitation of management audit is its heavy reliance on the auditor's judgement, since there are no universally accepted standards for measuring managerial performance. It can be done by external professionals, covers non-financial areas like human resources, and is forward-looking, so the other statements are incorrect.

  1. AIt can never be carried out by an external professional
  2. BIt cannot cover non-financial areas such as human resources
  3. CIt relies heavily on the auditor's judgement, as there are no universally accepted standards for measuring managerial performanceCorrect
  4. DIt is restricted to examining past transactions only

Explanation

Because managerial effectiveness is qualitative and no universally accepted benchmarks exist, findings depend heavily on judgement, which is a recognised limitation. Management audit can be done by external professionals, covers non-financial areas such as human resources, and is forward-looking, so options A, B and D are incorrect.

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