Budget Assignment

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The purpose of this paper is to explore the various stages of the budgeting process and attempt to evaluate their effectiveness. I will further evaluate the level and validity of detailed assumptions used to create budget estimates. I will discuss the role of the budget as an analytic tool and explain how the budget can be used to evaluate organizational performance, eliminate inefficiencies in an organization's performance, and explain the budget's role in the business control cycle. I will further analyze control mechanisms that can be put in place to monitor and evaluate the budget, and describe how budget can be used in the performance accountability and reward process. Finally, I will identify a major business initiative in my…show more content…
During this stage, the decision makers begin to see if they will get the return on investment they initially anticipated.

Following a period of time, perhaps two or three years after approval, projects are reviewed to see whether they should be continued. This reevaluation is referred to as a postcompletion audit. Thorough postcompletion audits are typically performed on selected projects, usually the largest projects in a given year's budget for the firm or for each division. Postcompletion audits show the firms management how well the cash flows realized correspond with the cash flows forecasted several years earlier. (Peterson et al, 2002)

The post completion audit serves to thoroughly analyze the initial decision to allocate resources to a given project. If the project failed to meet established objectives this phase is often reffered to as a post-mortem analysis. By revisiting the project after an appropriate amount of time has passed, decision makers can determine a project's success or failure. In the case of failure lessons learned can be identified to avoid the same outcome in the future.

In creating a budget, decision makers attempt to forecast numbers as accurately as possible. Doing this requires detailed assumptions regarding future costs and returns on investment. While historical data can provide insight into future performance, it is by no means a reliable method that should be expected to provide consistent results.
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