Question

The selection of one course of action over another is:

A) screening decision

B) preference decision

C) post audit decision

D) none of the above

Answer 1

Answer - B: Preference Decision

Any project analysis starts with screening decision, where project is analyzed if it meets the certain hurdle rate or is the return better than the expected rate of return. Hence, this process where the criteria set is defined and set is called screening decision

Now, it may be possible that many projects would be meeting the hurdle rate, the decision to select one project over the other (in case of capital limitation) is done through preference decision. Here the decision to select the project is based on various parameters such as NPV, payback period, regulations, taxes, etc.

Post audit decision is more or less based after the review and if any process gap or control weakness is identified then such decisions are taken