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Sustainability and Strategic Audit > Prelims > Flashcards

Prelims Flashcards

1
Q

Type of management audit that is extremely useful as a diagnostic tool to pinpoint corporate-wide problem areas and to highlight organizational strengths and weaknesses.

A

Strategic Audit

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2
Q

3 components of audit engagement

A
  1. Assurance
  2. Insight
  3. Objectivity
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3
Q

Audit engagement should provide governance and risks and security control

A

Assurance

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4
Q

Provide information on catalysts, analysts…

A

Insight

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5
Q

Should have integrity, accountability, independency

A

Objectivity

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6
Q

Internat auditing is…

A
  • Designed ti add value and improve organization
  • Has systematic value
  • Helps an organization achieve its goals
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7
Q

Objectives of Auditors:

A
  1. Strategic Objective
  2. Operations Objectives
  3. Reporting Objectives
  4. Compliance Objectives
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8
Q

Goals related to stakeholders’ interests

A

Strategic objectives

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9
Q

Effectiveness of operations efficiency

A

Operations objectives

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10
Q

Internal and external, financial and non-financial

A

Reporting objectives

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11
Q

Adhering to laws and obligations/regulations that the organization is subjected to

A

Compliance Objectives

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12
Q

To record

A

Accounting

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13
Q

To check

A

Auditing

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14
Q

Auditing Criteria

A
  1. Operational effectiveness
  2. Quality
  3. Safeguarding assets
  4. Compliance with Organization rules and regulations
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15
Q

Audit Steps

A
  1. Evaluate current performance results
  2. Review corporate governance
  3. Scan and assess the external environment
  4. Scan and assess the internal environment
  5. Analyze strategic factors using SWOT
  6. Generate and evaluate strategic alternatives
  7. Evaluate and Control
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16
Q

Strategic Audit of a Corporation

A

I. Current Situation
II. Corporate Governance
III. External Environment: Opportunities & Threats
IV. Internal Environment: Strengths & Weaknesses

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17
Q

Current Situation

A

A. Current Performance
B. Strategic Posture

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18
Q

How did the corporation perform in the past year overall in terms of return on investment, market share, and profitability?

A

Current Performance

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19
Q

What is the corporation’s current mission, objectives, strategies, and policies?

Are they consistent with each other?

A

Strategic Posture

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20
Q

What business is the corporation? Why?

A

Mission

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21
Q

What are the corporate, business, and functional objectives?

A

Objectives

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22
Q

What strategy or mix of strategies is the corporation following?

A

Strategies

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23
Q

Are they consistent with each other, the mission and objectives and with internal and external environments?

A

Policies

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24
Q

II. Corporate Governance

A

A. Board of Directors
B. Top Management

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25
Q

Who are they? Are they external or internal? Do they own significant shares of stocks?

A

Board of Directors

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26
Q
  • Responsible for the corporation’s performance
  • Establish a systematic approach to strategic management
  • Interactions with lower level managers and BOD
A

Top Management

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27
Q

III. External Environment: Opportunities & Threats

A

A. Societal Environment
B.Task Environment

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28
Q

Societal environment composes of:

A

a. Economic
b. Technological
c. Political-legal
d. Sociocultural

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29
Q

Task Environment

A

a. Threat of new entrants
b. Bargaining power of buyers
c. Threat of substitute products or services
d. Bargaining power of suppliers
e. Rivalry among competing firms
f. Relative power of unions, governments, special interest groups, etc.

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30
Q

IV. Internal Environment: Strengths and Weaknesses

A

A. Corporate Structure
B. Corporate Culture
C. Corporate Resources

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31
Q
  • Centralization or De-centralization of decision-making
  • Organization based on functions, projects, or geography
A

Corporate Structure

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32
Q

Group behavior emerging within the organization

A

Corporate Culture

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33
Q

Corporate resources

A
  1. Marketing
  2. Finance
  3. Research and Development
  4. Operations and Logistics
  5. Human Resource Management
34
Q

3 stage process of Strategic Management

A
  1. Strategy Formulation
  2. Strategy Implementation
  3. Strategy Evaluation
35
Q

Strategy Formulation contains:

A
  1. Vision & Mission
  2. SWOT
  3. Long-term objectives
  4. Alternate strategies
  5. Strategy selection
36
Q

The action stage of strategic management

A

Strategy Implementation

37
Q

Strategy implementation includes

A
  • Annual objectives
  • Policies
  • Employees
  • Motivation Resource
  • Allocation
38
Q

Final stage of strategic management

A

Strategy evaluation

39
Q

Strategy evaluation includes…

A
  • Internal review
  • External review performance
  • Measurement
  • Corrective action
40
Q

Attempts to organize quantitative and qualitative information under conditions of uncertainty

A

Strategic management process

41
Q

Which increases dramatically

A
  • E-commerce
  • Demographics
  • Technology
  • Merger-mania
42
Q

Most responsible for success or failure of an organization

A

Strategists

43
Q

Various Job titles of strategists

A
  • Chief executive officer
  • President
  • Owner
  • Chairman of the board
  • Executive director
  • entrepreneur
44
Q

What do we want to become?

A

Vision

45
Q

What is our business?

A

Mission statement

46
Q

Significantly benefit or harm the organization in the future

A

External opportunities and threats

47
Q

Trends included in external opportunities and threats

A
  • Economic
  • Social
  • Cultural
  • Demographic Environmental
  • Political, legal, governmental
  • Technological
  • Competitive trends
48
Q

Process of conducting research and gathering and assimilating external information

A

Industry Analysis

49
Q

Controllable activities performed especially well or poorly.

A

Internal strengths and weaknesses

50
Q

Arises in functional areas of the business

A
  • Management
  • Marketing
  • Finance / Accounting
  • Production / Operations
  • Research & Development
  • Computer information systems
51
Q

Internal factors

A
  • Financial ratios
  • Measuring performance
  • Industry averages
  • Survey data
52
Q

Long-term objectives

A
  • State direction
  • Aid in evaluation
  • Create synergy
  • Focus coordination
  • Basis for planning, motivating and controlling
53
Q

Means by which long-term objectives will be achieved

A

Strategies

54
Q

Strategies include:

A
  • Geographic expansion, diversification
  • Acquisition
  • Product development, market penetration
  • Retrenchment, divestiture
  • Liquidation, joint venture
55
Q

Short-term milestones that organizations must achieve to reach long-term objectives

A

Annual Objectives

56
Q

Means by which annual objectives will be achieved.

A

Policies

57
Q

Strategic Management Model

A
  1. Identify the organization’s existing
    - vision
    - mission
    - objectives
    - Strategies
  2. Perform external audit
  3. Perform internal audit
  4. Establish long-term objectives
  5. Generate, evaluate, select strategies
  6. Implement strategies
  7. Measure and evaluate performance
58
Q

Benefits of Strategic management in finance:

A
  • Improvement in sales
  • Improvement on profitability
  • Improvement in productivity
59
Q

Nonfinancial benefits of strategic management

A
  • enhanced awareness of external threats
  • improved understanding of competitor’s strategies
  • increased employee productivity
  • reduced resistance to change
  • understanding of performance-reward relationships
  • enhance problem-prevention
60
Q

other benefits of strategic management

A
  1. identification of opportunities
  2. objective view of mgt. problems
  3. Improved coordination and control
  4. minimizes adverse conditions and changes
  5. decisions to better support objectives
  6. effective allocation of time and resources
  7. internal communication among personnel
  8. Integration of individual behaviors
  9. Clarifies individual responsibilities
  10. encourages forward thinking
  11. Encourages favorable attitude toward change
  12. Discipline and formality to the management of the business
61
Q

Why some firms do not do strategic planning?

A
  • poor reward structures
  • fire-fighting
  • waste of time
  • too expensive
  • laziness
  • content with success
  • fear of failure
  • overconfidence
  • prior bad experience
  • self-interest
  • fear of the unknown
  • suspicion
62
Q

Principles of conduct within organizations that guide decision making and behavior

A

Business ethics

63
Q

Prerequisite for good strategic management

A

Good business ethics

64
Q

Provides basis on which policies can be devised to guide daily behavior and decisions at the workplace

A

Code of business ethics

65
Q

Emerging ethical issue of immense proportion

A

Internet privacy

66
Q

Unethical business actions

A
  • misleading advertising
  • misleading labeling
  • environmental harm
  • poor product or service safety
  • padding expense accounts
  • insider trading
  • dumping flawed products on foreign markets
67
Q

International or multinational corporations

A
  • Parent company
  • Host country
68
Q

Advantages of International Operations

A
  • Excess capacity
  • Reduce unit costs
  • Spread economic risks over wider markets
  • Low-cost production facilities
  • Competition may be less intense
  • Reduced tariffs, lower taxes
  • Economies of scale
69
Q

Disadvantages of International

A
  • Different social, cultural demographic, legal forces may create difficult communication
  • Weaknesses of foreign competition may be underestimated
  • Barriers to communication and effective management of personnel
  • Complications from different monetary systems
70
Q

Identification and evaluation of trends and events beyond control of single firm

A

External audit

71
Q

External audit contains

A
  • Increased foreign competition
  • Population shifts
  • Aging society
  • Information Technology
  • Computer revolution
  • Stock market volatility
72
Q

Purpose of External audit

A
  • Development of finite list
    • opportunities
  • threats
73
Q

5 broad categories of external audit

A
  1. Economic forces
  2. Social, cultural, demographic, & environmental forces
  3. Political, governmental, and legal forces
  4. Technological factors
  5. Competitive factors
74
Q

Steps to performing an External Audit

A
  1. Gather competitive Intelligence
  2. Assimilate information
  3. Evaluate
75
Q

What do you have to evaluate when performing external audit?

A
  • Social
  • Cultural
  • Demographic
  • Environmental
  • Economic
  • Political, legal, governmental
  • Technological
76
Q

Sources of information include

A
  • Internet
  • Libraries
  • Suppliers
  • Distributors
  • Customers
  • Competition
77
Q

Key factors vary over…

A
  • time
  • by industry
78
Q

Variable include

A
  • Market share
  • Breadth of competing products
  • World economies
  • Foreign affiliates
  • Proprietary account advantages
  • Price competitiveness
  • Technological advancements
  • Interest rates
  • Pollution abatement
79
Q

Key external factors:

A
  1. Oriented to long-term & annual objectives
  2. Measurable
  3. Applicable to all competing firms
  4. Hierarchal
    a. overall company
    b. divisional or functional areas
80
Q

Economic variables to be monitored

A
  • Availability of credit
  • Unemployment rates
  • Interest rates
  • Inflation rates
  • Money market rates
  • Federal government budget deficits
  • Gross domestic product trend
  • Unemployment trends
  • Worker productivity levels
  • Value of the dollar in world markets
  • Stock market trends
  • Foreign countries’ economic conditions
  • Import/export factors
  • Demand shifts for goods/services
  • Income differences by region/customer
  • Price fluctuations
  • Exportation of labor & Capital
  • Monetary policies
  • Fiscal policies
  • Tax rates
  • ECC policies (economic cooperation council)
  • OPEC policies (organization of the Petroleum Exporting Countries)
  • LDC policies (Least developed countries)

Sustainability and Strategic Audit (3 decks)

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