A post-audit is conducted ______.

A. before authorizing and/or starting a project
B. shortly after a project has started operating
C. long after the project has been completed and the salvage has been realized

Correct Answer: B

The post-audit is a check on the validity of the capital allocation process. The post-audit can reveal problems such as consistent over- or underestimation of cash flows, omission of significant cash flows, etc. However, the success or failure of a project may depend on much more than the accuracy of the capital allocation estimate. Factors beyond the control of the firm's managers (such as economic conditions, actions of competitors, etc.) play a significant role in the outcome.