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

Which statement best distinguishes management audit from a statutory financial audit?

Management audit is largely forward-looking and appraises how effectively management performs and achieves objectives, recommending improvements. A financial audit looks at past transactions and gives an opinion on whether statements show a true and fair view. The two have different objectives and orientation.

  1. AManagement audit is mandatory for all companies, while financial audit is voluntary
  2. BManagement audit is forward-looking and evaluates effectiveness of managerial performance, while financial audit gives an opinion on the true and fair view of financial statementsCorrect
  3. CManagement audit expresses an opinion on the true and fair view of accounts, while financial audit evaluates managerial efficiency
  4. DBoth have identical objectives and differ only in the auditor's designation

Explanation

Financial audit is backward-looking and ends in an opinion on the financial statements. Management audit assesses the effectiveness of management policies and decisions and suggests improvements. The option reversing these objectives is wrong, and management audit is not a general statutory requirement for all companies.

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