Internal Audit Management Overview

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Questions and Answers

Which aspect of a firm’s financial management should be assessed regarding investor relations?

Employee satisfaction

Cost of production

Dividend payout policies (correct)

Market share growth

What is a critical component of auditing production and operations?

Sales forecasting accuracy

Quality-control policies and procedures (correct)

Employee turnover rates

Corporate social responsibility practices

In a research and development audit, which factor is crucial if R&D is outsourced?

Employee experience

Market saturation

Brand reputation

Cost-effectiveness (correct)

What should be reviewed to ensure the effectiveness of R&D within a firm?

Qualifications of R&D personnel Signup and view all the answers

Which question assesses the operational reliability of a firm’s suppliers?

Are suppliers of materials and parts reliable? Signup and view all the answers

Which of the following best describes the purpose of Management Information Systems?

Improving the quality of managerial decisions Signup and view all the answers

What factor should be evaluated to ensure competitive R&D resources?

Allocation of R&D resources Signup and view all the answers

Which area should be focused on in an operations audit regarding facility management?

Condition of facilities and equipment Signup and view all the answers

What is one of the functions of marketing?

Customer analysis Signup and view all the answers

Which of the following is NOT included in the marketing audit checklist?

Are job descriptions clear? Signup and view all the answers

What does effective reward mechanisms in an organization aim to address?

High employee turnover Signup and view all the answers

Which of the following factors is assessed in the finance/accounting audit?

Sufficient working capital Signup and view all the answers

Which marketing function involves determining the feasibility of the market?

Opportunity analysis Signup and view all the answers

What is an essential question to assess during a marketing audit regarding the sales force?

Is the sales force effective? Signup and view all the answers

Effective marketing management can be influenced by which of the following factors?

Experience and training of marketing managers Signup and view all the answers

Which decision is part of the finance/accounting processes?

Dividend decision Signup and view all the answers

What is the first step in creating an Internal Factor Evaluation (IFE) Matrix?

List key internal factors Signup and view all the answers

Which question assesses whether all managers utilize the information system for decision-making?

Do all managers use the information system to make decisions? Signup and view all the answers

Which of these is NOT a factor evaluated in the IFE Matrix process?

Are computer training workshops provided for users? Signup and view all the answers

What is an essential characteristic of an effective information system based on the provided content?

User-friendliness Signup and view all the answers

What is the purpose of assigning weights to key internal factors in the IFE Matrix?

To identify the significance of each factor in decision-making Signup and view all the answers

What is the main purpose of conducting an internal audit?

To evaluate internal strengths and weaknesses. Signup and view all the answers

Which area is NOT typically assessed in an internal audit?

Political circumstances Signup and view all the answers

What are distinctive competencies?

Strengths that cannot be easily imitated by competitors. Signup and view all the answers

According to the internal audit checklist, which factor does NOT contribute to effective management?

High employee turnover. Signup and view all the answers

How does the internal audit process relate to the external audit process?

They involve gathering information from similar organizational areas. Signup and view all the answers

What is a significant consequence of weak leadership within a firm?

The potential failure of well-structured strategies. Signup and view all the answers

What is NOT a key area focused upon during an internal audit?

External regulatory compliance Signup and view all the answers

What role does a clear statement of mission play in an internal audit?

It serves as the basis for objectives and strategies. Signup and view all the answers

Study Notes

Internal Audit

An internal audit identifies strengths and weaknesses in a firm's management, marketing, finance and accounting, production and operations, research and development, and management information systems.

Key Internal Forces

Distinctive competencies are strengths that cannot be easily matched or imitated by competitors.
Building a competitive advantage involves taking advantage of a firm's distinctive competencies.

Management Audit Checklist

The firm should have a clear mission statement, use strategic management concepts, and have measurable, well-communicated objectives and goals.
Managers at all levels should plan effectively and delegate well.
The organization's structure should be appropriate, with clear job descriptions and specifications.
Employee morale, absenteeism, and turnover should be low, and the reward mechanisms should be effective.
The organization's control mechanisms should be effective.

Marketing Audit

Markets should be segmented effectively, and the organization should be well-positioned among competitors.
The firm's market share should be increasing, and distribution channels should be reliable and cost-effective.
The sales force should be effective, and the firm should conduct market research.
Product quality and customer service should be high, and products and services should be priced appropriately.
The firm should have effective promotion, advertising, and publicity strategies.
Marketing planning and budgeting should be effective, and marketing managers should have adequate experience and training.
The firm's internet presence should be competitive.

Finance/Accounting Audit

Analyze the firm's financial strengths and weaknesses by examining its financial ratios.
Determine if the firm can raise needed short-term and long-term capital.
Evaluate if the firm has sufficient working capital and if its capital budgeting procedures are effective.
Evaluate the firm's dividend policies and how well it relates to its investors and stockholders.
Assess the experience and training of the firm's finance managers.
Assess the firm's debt situation.

Production/Operations Audit

Ensure suppliers are reliable and reasonable.
Confirm facilities, equipment, machinery, and offices are in good condition.
Assess the effectiveness of the firm's inventory-control policies and procedures.
Evaluate the effectiveness of quality-control policies and procedures.
Determine if facilities, resources, and markets are strategically located.
Assess the firm's technological competencies.

Research & Development Audit

Determine if R&D facilities are adequate.
If outsourcing R&D, assess whether it is cost-effective.
Evaluate qualifications of R&D personnel.
Determine if R&D resources are allocated effectively.
Ensure MIS and computer systems are adequate.
Assess the effectiveness of communication between R&D and other organizational units.
Determine if the firm's current products are technologically competitive.

Management Information Systems Audit

Ensure all managers use the information system to make decisions.
Verify the presence of a CIO or Director of Information Systems.
Determine if data is updated regularly.
Confirm that managers from all functional areas contribute input to the information system.
Evaluate the effectiveness of passwords for entry into the firm's information system.
Assess the familiarity of strategists with the information systems of rival firms.
Determine if the information system is user-friendly.
Verify understanding among system users of the competitive advantages that information can provide.
Evaluate the availability of computer training workshops.
Assess if the firm's system is being improved.

Internal Factor Evaluation (IFE) Matrix

List the key internal factors.
Assign a weight (0.0 - 1.0) to each factor.
Assign a rating (1 - 4) to each factor.
Multiply the weight by the rating.
Sum the weighted scores.

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Description

This quiz covers the critical aspects of internal auditing, focusing on how it evaluates a firm's strengths and weaknesses across various functions like management, marketing, finance, and operations. Test your understanding of distinctive competencies and how they contribute to building a competitive advantage in business settings.