Q.1 What is the primary objective of a management audit?
To verify financial statements
To evaluate the effectiveness of management
To detect tax evasion
To assess compliance with laws
Explanation - Management audit focuses on assessing the efficiency, effectiveness, and performance of management in achieving organizational objectives.
Correct answer is: To evaluate the effectiveness of management
Q.2 Which of the following is NOT a component of management audit?
Review of organizational structure
Evaluation of internal control systems
Verification of accounting records
Assessment of managerial decisions
Explanation - Verification of accounting records is part of financial audit, not management audit which focuses on managerial effectiveness and policies.
Correct answer is: Verification of accounting records
Q.3 Management audit helps in:
Increasing profitability by reducing costs
Assessing managerial efficiency
Preparing statutory financial statements
Ensuring tax compliance
Explanation - Management audit evaluates the efficiency and effectiveness of managers in utilizing resources to achieve organizational goals.
Correct answer is: Assessing managerial efficiency
Q.4 Which type of audit examines policies, procedures, and organizational objectives?
Financial audit
Internal audit
Management audit
Tax audit
Explanation - Management audit evaluates policies, procedures, objectives, and performance to ensure managerial effectiveness.
Correct answer is: Management audit
Q.5 A management audit primarily benefits:
Shareholders only
Government authorities
Top management
External creditors
Explanation - Management audit provides insights and recommendations to top management for improving efficiency and decision-making.
Correct answer is: Top management
Q.6 Which of the following methods is commonly used in management audit?
Questionnaires and interviews
Bank statement verification
Inventory counting
Tax return analysis
Explanation - Management audits use qualitative techniques like questionnaires, interviews, and performance appraisals to evaluate managerial effectiveness.
Correct answer is: Questionnaires and interviews
Q.7 Management audit is also referred to as:
Operational audit
Performance audit
Compliance audit
Financial audit
Explanation - Management audit evaluates performance of managers and the efficiency of operations, hence often called performance audit.
Correct answer is: Performance audit
Q.8 Which of the following is a limitation of management audit?
It ignores managerial performance
It is entirely subjective
It cannot suggest improvements
It does not involve top management
Explanation - Management audit involves subjective judgment in evaluating managerial efficiency, which can be a limitation.
Correct answer is: It is entirely subjective
Q.9 Management audit is usually conducted by:
External auditors
Internal auditors or specialized management auditors
Tax consultants
Government officials
Explanation - Management audits are carried out by trained internal or external auditors specialized in evaluating managerial performance.
Correct answer is: Internal auditors or specialized management auditors
Q.10 Which of the following is NOT an objective of management audit?
Analyzing management policies
Improving managerial efficiency
Ensuring statutory compliance
Evaluating operational procedures
Explanation - Statutory compliance is the objective of financial and compliance audits, not management audit.
Correct answer is: Ensuring statutory compliance
Q.11 A management audit may cover all of the following EXCEPT:
Managerial decisions
Operational policies
Financial statement accuracy
Human resource utilization
Explanation - Accuracy of financial statements is part of financial audit; management audit focuses on policies, procedures, and managerial decisions.
Correct answer is: Financial statement accuracy
Q.12 Management audit contributes to:
Regulatory compliance
Improved managerial decision-making
Tax planning
Profit distribution to shareholders
Explanation - By evaluating management effectiveness, a management audit provides feedback that improves managerial decisions.
Correct answer is: Improved managerial decision-making
Q.13 Which audit technique involves comparing actual performance with standards?
Financial auditing
Variance analysis in management audit
Inventory verification
Tax auditing
Explanation - Management audits often use variance analysis to compare actual performance with pre-determined standards to evaluate efficiency.
Correct answer is: Variance analysis in management audit
Q.14 Which of the following is a characteristic of management audit?
Focus on statutory compliance
Emphasis on managerial effectiveness
Concerned only with financial records
Limited to tax issues
Explanation - Management audit emphasizes evaluating managerial performance, decision-making, and organizational efficiency.
Correct answer is: Emphasis on managerial effectiveness
Q.15 Management audit reports are usually submitted to:
Government authorities
Top management
Shareholders exclusively
External creditors
Explanation - The main purpose of management audit is to provide feedback to top management for improvement in planning and control.
Correct answer is: Top management
Q.16 Which of the following is a key tool in management audit?
Ratio analysis of financial statements
Organizational charts review
Income tax computation
Audit of statutory registers
Explanation - Reviewing organizational structure and charts is an important tool for assessing management efficiency in a management audit.
Correct answer is: Organizational charts review
Q.17 Management audit evaluates:
Only financial transactions
The effectiveness of managerial policies and operations
Only internal controls
Compliance with tax laws
Explanation - It assesses how well management plans, directs, and controls organizational resources and operations.
Correct answer is: The effectiveness of managerial policies and operations
Q.18 Which of the following statements is TRUE about management audit?
It replaces financial audit
It assesses efficiency, not legality
It is mandatory for all companies
It focuses on tax planning
Explanation - Management audit is concerned with evaluating efficiency and effectiveness, not legal or statutory compliance.
Correct answer is: It assesses efficiency, not legality
Q.19 Management audit can help an organization to:
Reduce tax liabilities
Enhance managerial performance
Prepare statutory financial statements
File legal compliance reports
Explanation - It identifies areas where managerial performance can be improved and suggests corrective measures.
Correct answer is: Enhance managerial performance
Q.20 Which of the following best describes management audit?
Audit of financial statements for accuracy
Evaluation of managerial policies, procedures, and performance
Audit of tax returns
Audit of statutory compliance documents
Explanation - Management audit systematically evaluates managerial performance and organizational policies to improve efficiency.
Correct answer is: Evaluation of managerial policies, procedures, and performance
Q.21 Which of the following is an advantage of management audit?
Ensures statutory compliance
Improves managerial efficiency and decision-making
Detects accounting errors
Reduces tax liability
Explanation - Management audit helps managers identify weaknesses and improve planning, controlling, and decision-making processes.
Correct answer is: Improves managerial efficiency and decision-making
Q.22 Management audit differs from financial audit because:
It focuses on managerial efficiency rather than financial accuracy
It is legally required
It only examines tax compliance
It is limited to cash verification
Explanation - While financial audit checks accuracy of accounts, management audit evaluates effectiveness and efficiency of management.
Correct answer is: It focuses on managerial efficiency rather than financial accuracy
Q.23 Which of the following is a step in management audit?
Review of objectives and policies
Checking bank balances
Physical verification of stock
Tax computation
Explanation - Management audit begins with evaluating organizational objectives, policies, and the efficiency of managerial functions.
Correct answer is: Review of objectives and policies
Q.24 Which of the following is a limitation of management audit?
It is time-consuming and subjective
It ignores managerial efficiency
It only focuses on tax compliance
It cannot improve decision-making
Explanation - Management audit requires in-depth study and relies on judgment, making it time-consuming and somewhat subjective.
Correct answer is: It is time-consuming and subjective