With the core value of integrity in mind, consider Management’s responsibility when it comes to estimates in the creation of budgets. Describe the incentives management has to misrepresent these estimates. Discuss controls/procedures that may be put in place to prevent misrepresentation of these estimates.
Comment on the following statement made by a plant manager: Meetings with my plant accountant are frustrating. All he wants to do is pin the blame on someone for the many variances he reports
Bill Watts, president of Western Publications, accepts a capital budgeting project proposal by division X. This is the division in which the president spent his first 10 years with the company. On the same day, the president rejects a capital budgeting project proposal from division Y. The manager of division Y is incensed. She believes that the division Y project has an intemal rate of return at least 10 percentage points higher than the division X project. She comments, What is the point of all our detailed DCF analysis? If Watts is panting over a project, he can arrange to have the proponents of that project massage the numbers so that it looks like a winner. What advice would you give the manager of division Y?