Uncertainty and the Budgeting Process: as Indicated in the Text

question 13

Essay

Uncertainty and the Budgeting Process: As indicated in the text, the validity of pro-forma financial statements that are produced as part of the master budgeting process is affected by the accuracy of the forecasted data going into the component budgets.Such data are subject to various levels of uncertainty.For this reason, accountants need to understand ways of dealing with uncertainty in the budgeting process.
Required: Define and distinguish among the following ways of handling uncertainty in the budgeting process:
1.What-if analysis (give at least one concrete example)
2.Sensitivity analysis
3.Scenario analysis.

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Definitions:

Interested Parties

Individuals or groups who have a stake or interest in the outcome of a project, decision, or issue.

Canadian Federal Court

A court in Canada that has jurisdiction over federal law disputes, citizenship appeals, and other specified areas.

Sexual Harassment Settlement

An agreement reached to resolve claims of sexual harassment, often involving compensation to the victim and sometimes confidentiality clauses.

Potential to be Affected

The possibility or capacity of an individual, group, or system to experience impact or change as a result of external or internal forces.