Question TwoQuestion three (Total mark: 4 marks word limit: 400 words)

One of the main functions of budgets is evaluating performance. In this evaluation role, budgets serve as a useful standard of measurement. However, if budget performance is overemphasized when evaluating managers performance, the managers might take undesirable actions such as padding the budget.

Required:

Identify four undesirable actions (other than padding the budget) that managers might take as a result of an overemphasis on budgets as a performance measure. Briefly explain how each action you have identified affects the long-term performance.