Indicate whether each of the following statements is true or false: A postaudit should be conducted...

Indicate whether each of the following statements is true or false:

A postaudit should be conducted at the time a capital investment is purchased.

True  False

The postaudit of a capital investment project should be made using the same analytical technique that was used in deciding to make the investment.

True  False

The purpose of postaudits is to improve a company's capital investment decision process.

True  False

The postaudit process uses expected cash flows and the company's cost of capital.

True  False

Making good estimates of future cash flows is important in making capital investment decisions.

True  False

Expert Solution

TRUE: Pre Audit Refers to anticipate the result of Capital Investment, As Capital investment requires huge funds, time, and other resources. So Capital investment decision is very crucial decision and it may hamper the future growth of the organisation.

FALSE: The technique might be different. As while deciding capital investment project an analyst can use many techniques like PAyback period , present value of cash inflows etc.

TRUE: As the Post Audit provides a roadmap to future investment. though this an entity is able to recognize its "SWOT" and after analyzing its "SWOT" an organisation may improve its decion making process.

FALSE: Because Post audit use expected discounted cash flows and the company's cost of capital (cost of equity and cost of debt).

TRUE: Because the plan with high Cash Inflows in relatively Short period of time will be preferred more than the plan having low cash flows.

ekkarill92 answered 2 years ago

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