Auditing Flashcards
What should a balance sheet include?
Information about a company’s assets and liabilities, and the shareholders’ equity that results. These things might include short-term assets, such as cash and accounts receivable, inventories, or long-term assets such as property, plant, and equipment
What does a profit and loss statement include?
- Income – this is the sales income/revenue from selling products or services
- Cost of goods (or services) sold – this refers to the cost directly involved in production/manufacture of goods/services. For example, the amount spent on materials for production
- Gross profit/loss – this is calculated by taking away the cost of goods sold from
income/sales revenue - Expenses (or operating expenses) – are the expenses incurred whilst carrying out business. For example: electricity bills, wages/salaries, stationery, telephone bills, rent,
etc. - Net profit/loss – this is calculated by taking away expenses from the gross profit/loss
What is organisational ability?
The ability to respond quickly and effectively (and more quickly and effectively than your competitors) to rapid changes in a turbulent or dynamic market. It should be one of the factors assessed as part of an audit of your organisation’s internal environment.
How is organisational ability achieved?
By being alert to both internal and environmental changes
– opportunities as well as challenges – and the ability to use available resources in a timely, flexible, affordable and relevant manner, in order to respond to those changes effectively.
Ashton identifies 6 dimensions of organisational agility, each of which affects organisational performance and success… what are they?
- Leadership & Management – the style of your leadership and its alignment to your strategy, the strength and speed of decision-making, the clarity of communication and the degree to which it is trusted.
- Innovation – the degree to which an organisation has a systematic approach for sharing insights and continually generating new ideas, as well as the degree to which it uses internal and external networks to share ideas.
- Strategy – the way in which strategy is developed, encouraging internal dialogue, and how clearly your strategic intent is communicated and the level of stretch you impose.
- Culture – the way your employees’ collective values and opinions guide behaviour will impact on how agile your organisation can be. This culture can be influenced by your policies and practices.
- Learning & Change – the degree to which the organisation has a shared vision, has an appetite for change and the capability to enact the changes, and how it deals with the consequences of past decisions.
- Structure – the strength and robustness of operations and processes combined with the degree to which your managers have clear delegated decision-making authority
Who identified core competency? Why?
Prahalad and Hamel 1990.
As the key to finding an organisation’s Unique Selling Points (USP) .
Factors that affect the attractiveness of a market (segment) include..?
Size of market – too small is undesirable, but too big might also be a problem since one should usually aim for a strategy of developing significant market share. (If the market is too large for comfort, can it be meaningfully subdivided?)
* Expected growth rate of market
* Level of competitive activity – less is better, but none at all is sometimes a disadvantage, as in that case you have to carry all the burden of market education.
* Price-sensitivity of market
* Expected profitability
Any organisation can only increase its revenue and profits by what means?
- Improving productivity, such as: a better product/market/customer
mix; lower discounts; more sales calls; better sales calls; charging for deliveries - Growth in market size
- Growth in market share for existing products in new markets
- Growth from new products in existing markets
- Growth from existing products in new markets
- Growth from new products in new markets
- Growth from other sources, such as from acquisitions joint ventures, licensing etc.
What are the 5 stages of the product life cycle?
development, introduction, growth, maturity, and decline
What are the strengths of strategic implications?
- Gives marketers the ability to forecast product directions at a strategic level, and plan for timely execution of relevant competitive moves. It can also be used as an explanatory tool in generating insight into past and future sales
- Aids in making sense of past events as part of any future strategy formulation as well as providing a validation process for the strategy since it reflects on market dynamics, customer changes and other market issues
- Assists in planning long-term offensive marketing strategies, particularly when markets and economies are stable. Particularly useful when dealing with end-of-life situations where products may be creating a drag on a company’s resources
What does value chain analysis help?
Helps to generate a better understanding of the various activities of an organisation and how together they can create competitive advantage and ultimately shareholder value. These benefits can be realised through cost advantage, effective
differentiation, superior technology or value-adding service/support.
Why is the value chain analysis used?
as a way of diagnosing problems within an organisation in terms of internal communications and team working. Through an evaluation of the importance of each link and its relative strength, a strategy can be created around managing the value chain. This may range from investing in both elements to strengthen both functions, to realising one of the functions is not a core competence and deciding to
outsource it.
* by using it in conjunction with similar analysis of partner organisations, it can highlight the existence and value of key inter-company relationships. Significant competitive advantage can be gained from a deep understanding of how to interact with key partners.
* to benchmark against the competition
What are the strengths of the value chain analysis?
Provides a unified view of the whole organisation showing the interrelationship between direct and indirect costs
* Provides an ability to identify and isolate specific competencies within an organisation and the strength of the links between these
What are the weaknesses of the value chain analysis?
Can be hard to map onto an existing organisation as it depends on an in-depth knowledge of the whole business – particularly when trying to identify relationship strengths which may be tacitly rather than explicitly held
* Is very internally focused and unless specifically used in conjunction with the value chains of upstream and downstream partners can fail to present the whole picture
What things do we need to consider when auditing an internal environment?
- All of the resources available – including people, finance and materials
- The quality, knowledge, skills, experience and training of our staff
- The ability of our management (a sensitive issue)
- The quality (i.e. age and state of the art) of our production facilities if appropriate; and the quality of our IT systems and databases
- The quality of our R&D or ability to create new products
- The quality of our market knowledge (research and market intelligence systems)
- The market position of our products/services, their market share, profitability and their position in the market (awareness, quality, appeal)
- The effectiveness of our marketing communications
- The corporate goals and objectives which drive and shape the direction and
approach taken - The culture of the organisation – its mission and values, ways of working, policies,
systems, procedures and approach to risk
