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Handbook of Budgeting, 6th Edition by William R. Lalli

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CHAPTER TEN

Implementing Forecasting Best Practices

Terrence B. Hobdy, BBA, MBA

Management Information Specialists, Inc.

INTRODUCTION

The headlines from the past year clearly indicate that Corporate America has failed miserably in regard to reporting accurate and reliable financial results. The mere mention of an accounting irregularity has severely affected the stock prices of major corporations. Additionally, the cozy relationship among Wall Street firms, accounting firms, and Main Street clients have further clouded this issue. Unethical issues aside, the average investor cannot fully understand the financial results presented by corporations to make clear investment decisions.

During an interview on 60 Minutes, the chief executive officer (CEO) of a multibillion-dollar software corporation stated, “The only way that any company can predict their financial results, earnings per share, to the penny is to cook the books.” Instead of reporting true corporate performance, some companies have resorted to unethical approaches to produce unrealistic financial results. Overall, the lack of transparency in financial performance has seriously dampened the trust between corporations and investors.

In response to the growing problems with reporting financial results, several steps have been taken to restore investor confidence.

1. Congress enacted the Sarbanes-Oxley Act, which established a new Public Accounting Oversight Board. In addition, CEOs and chief financial officers of publicly ...

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