Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 198

Which of the following is a distinguishing feature of managerial accounting, which is not applicable to financial accounting?

Answer options

• A. Managerial accounting uses double-entry accounting and cost data.
• B. Managerial accounting uses general accepted accounting principles.
• C. Managerial accounting involves decision making based on quantifiable economic events.
• D. Managerial accounting involves decision making based on predetermined standards.

Correct answer: D

Explanation

The correct answer, D, highlights that managerial accounting is focused on decision-making guided by established benchmarks, which is not a primary concern of financial accounting. Options A and B are incorrect because both managerial and financial accounting can utilize double-entry systems and GAAP, respectively. Option C, while relevant to managerial accounting, does not differentiate it from financial accounting as both can involve decision-making based on quantifiable data.