ch3 Flashcards
How is External Audit defined?
An audit of the external environment in which a business finds itself, such as the market within which it operates or government restrictions on its operations.is and analysis of the environment which the business operates in
How is Internal Audit defined?
An analysis of the business itself and how it operates.this could be conducted by a outside business
How is SWOT analysis defined?
An analysis of the internal strengths and weaknesses of the business and the opportunities and threats presented by the external environment.
How is Trade Association defined?
An organisation whose members are all involved in the same industry or trade. The organisation pursues the interests of these businesses.
What is an Internal Audit?
This will analyse the organisation andattempt to identify the strengthsand weaknesseswithin it.
it might cover areas such as:
- The products made, including production costs, quality andR&D
- The current financial position; cashflow,profits, reserves
- Production, including; methodologycapacity, efficiency
- Businessstructure, and
HR,trainingand recruitment
In a large business the internal audit might be conducted by outside management consultant. This could help produce a more independent-minded analysis of the business’s situation
What is an External Audit?
Takes a critical look atthecompetitive environment that theorganisation operates in. It will consider:
- Size and growth potential of the market
- Characteristics of thecustomers
- Alternative products
- Pricingof alternatives
- Methods of distribution
- Methods of promotion
- Industrypractices,trade unionsorgovernment regulation
It should also included an analyse of competition such as( the number and size of the competitions, production capacity, finance, investments, profits, etc.)
What is SWOT analysis?
It is a helpful way of summarising information gathered.
- In the case it look at the Internal Strengths (S) and Weaknesses (W) of a business and the External Opportunities (O) and Threats (T) it may face.
What are Strengths as part of the SWOT analysis?
These are the positive aspect of a business that may be identified from the internal audit. For Example:
a respected, intelligent and inspirational leader
loyal and motivated workforce
a product with USP
a loyal customer base
What are Opportunities as part of the SWOT analysis?
these are options or opening that the business might be able to exploit that are identified by the external audit. For Example:
a new overseas market opening up following political changes
a fall in the cost of essential raw material
low interest rates, which provide cheap finance for investment
a fall in the exchange rates, which will make export cheaper
What are Weaknesses as part of the SWOT analysis?
These are the negative aspects of a business that may be identified from the internal audit. For example:
A high staff turnover with poorly motivated workforce
A organisation structure with too many layers
A product range that is out of date
Poor cash flow and debt
What are Threats as a part of the SWOT analysis?
These are the possible hazards or perils that have the potential to damage the performance of the business which have been identified by the external audit. For Example:
a new entrant in the market
a rival appoint a new and highly successful CEO
a looming recession
new legislation aimed at improving right of employees
When may SWOT analysis be used?
To make a decision about which newproduct to launch
Help design a new marketing strategy
Help decide whether to outsource a specific business task or activity, such as IT
Prepare for a completely new business venture
The analysis is only as useful as the action a business takes after the analysis e.g. a business need to take measure to eliminate weaknesses in order to actually improve
Methods to gather info
-internal audit
-external audit
What does internal aim to do
Identity strengths and weaknesses
Who may conduct a internal audit
By a outside business
