Advanced

(a) An extensive literature on the behavioural aspects of budgeting discusses the propensity of managers to create budgetary slack.

You are required to explain three ways in which managers may attempt to create budgetary slack, and how senior managers can identify these attempts to distort the budgetary system. (6 marks)

(b) Managerial behaviour can be quite different from that discussed in (a).

You are required to explain circumstances in which managers may be motivated to set themselves very high, possibly unachievable budgets. (6 marks)

(c) Sections

(a) and

(b) above are examples of differing managerial behaviour in disparate situations. There are theories which attempt to explain the consequences for the design of management accounting systems of dis¬ parate situations, one of which is contingency theory.

You are required to explain

• the contingency theory of management accounting

• the effects of environmental uncertainty on the choice of managerial control systems and on information systems for managerial control. (13 marks)

(Total 25 marks) CIMA Stage 4 Management Accounting -

Control and Audit