CFA Practice Question

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CFA Practice Question

Which of the following statements represent shortcomings of the post-audit process?

I. Forecasts are always "wrong" to some extent.
II. Forecasts may be "wrong" due to unanticipated circumstances.
III. Forecasts are "wrong" due to the decisions of managers no longer employed by the company.
Correct Answer: I, II and III

The post-audit process is difficult because (1) forecasts are always "wrong" to some degree, however small; (2) forecasts may be "wrong" due to circumstances that could not have been anticipated at the time they were made; (3) forecasts may seem "wrong" when viewed in isolation; and (4) forecasts may be "wrong" due to poor decisions made by executives or managers no longer employed by the company.

User Contributed Comments 7

User Comment
amamed213 Can someone explain why III is correct ?
Oarona It is correct because when people who control the process leave unexpectedly, it is hard to compare the forecast with the actual results
peteypete It is also hard to match the previous manager's skills and knowledge of similar proejcts with a new manager.
johntan1979 III is open to a lot of interpretations. For instance, the reason they are no longer employed by the company could be that they were fired because of poor judgment or decision.
Bududeen The reason being that forecasts are based on judgements; as such different managers have different approach to forecast and implementation.
assiduous Not sure if anyone else read the question differently but I think the word "limitations" should have been used in lieu of "shortcomings." Reading the question as written, leads me to think I am being asked how to assess whether or not my own post-audit process needs improvement.
Shaig Agree
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