Answer (B) is correct . Post-investment audits should be conducted to serve as a control mechanism and to deter managers from proposing unprofitable investments. Actual-to- expected cash flow comparisons should be made, and unfavorable variances should be explained. Individuals who supplied unrealistic estimates should have to explain differences.
Answer (A) is incorrect because Post-investment audits are not a stage in the capital budgeting process.
Answer (C) is incorrect because The temptation to evaluate the outcome of a project too early must be overcome. Until all cash flows are known, the results can be misleading. Post-investment audits can reduce this possibility.
Answer (D) is incorrect because The post-investment audits deter managers from proposing unprofitable investments.
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