a state the reasons why compliance with budget may not neces

a) state the reasons why compliance with budget may not necessary be an effective performance evaluation indicator nowadays. (4 marks)

b) state the reasons why it may not be long-term advantage for a business to run with the lowest possible stock. (4 marks)

c) list 3 aspects of performance measures that would be appropriate for an auditing firm (3 mark)

Solution

a. budgets should be in a flexible way and they should be in a position to meet the changes we should hold some adtional funds with the firm. so, some times we may need higher amounts than the budgeted one and some times lesser amounts. so, to evaluate a firms performance budget is not considering as main constraint in now a days.

b. because the demand for any product in long term can not be predictable. if the demand suddenly increased and if we are not in a position to provide the products to customers, then they go with competitors products. so, for long run of business, we need to maintain higher stock.

c. auditing is the process of verfication of accounts and financial statements of a company. it performs with the moto of how the firm is recording the financial transactions with respectives to transactions. good audit should consider all the factors and transactions of a firm during a period. it should find out the loopholes if any are there and express to the management. if there any mistakes or wrong activities, they need to be find out and inform to concern parties.