- CFA Exams
- 2021 CFA Level I Exam
- Study Session 10. Corporate Finance (1)
- Reading 32. Capital Budgeting
- Subject 1. Capital Budgeting: Introduction
CFA Practice Question
A post-audit is conducted ______.
B. shortly after a project has started operating
C. long after the project has been completed and the salvage has been realized
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 budgeting 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 budgeting 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.
User Contributed Comments 1
User | Comment |
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DorisAnsah | Very carefully selected and summarised |