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

Which statement correctly distinguishes management audit from internal audit?

Management audit is wider in scope, appraising the effectiveness of management's policies and decisions, while internal audit mainly tests the adequacy of internal controls and compliance with procedures. Management audit is also not generally a statutory requirement for all companies.

  1. AManagement audit is mandatory for every company under the Companies Act, while internal audit is voluntary
  2. BManagement audit has a wider scope covering the effectiveness of management itself, whereas internal audit mainly examines the adequacy of internal controls and compliance with proceduresCorrect
  3. CInternal audit is done only by external professionals, while management audit is done by employees
  4. DManagement audit examines only accounting entries, while internal audit examines policies

Explanation

Management audit appraises management's policies, decisions and overall effectiveness, a broader and higher-level review. Internal audit focuses on controls, procedures and compliance. No general statutory mandate for management audit exists, so option A is wrong.

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