ADDITIONAL

Definition of Audit

 An audit is a systematic, independent, and objective examination of

financial statements, records, transactions, or processes to determine
their accuracy, fairness, and compliance with applicable laws and standards.
Audits help organizations identify financial discrepancies, prevent fraud,
improve operational efficiency, and maintain transparency.
 Audits are usually conducted by internal or external auditors, depending on
the purpose and requirements. An auditor follows a structured approach,
including planning, evidence collection, analysis, reporting, and
recommendations for improvement.

Definition of Attestation

 Attestation refers to an independent auditor’s process of reviewing and

validating the accuracy and reliability of information provided by an
organization. This involves examining financial records, operational reports, or
compliance documents and issuing a formal opinion on whether they adhere
to specific standards, such as Generally Accepted Accounting Principles
(GAAP) or International Financial Reporting Standards (IFRS).

Attestation services typically include:

 Financial Statement Audits – Providing an opinion on the fairness of

financial statements.
 Compliance Attestation – Verifying adherence to laws and regulations.
 Agreed-Upon Procedures (AUP) – Performing specific procedures
requested by clients and reporting findings.

Types of Audit

1. Financial Audit
 Focus: Examination of an organization’s financial statements.
 Purpose: To provide assurance to stakeholders (e.g., investors, regulators)
that financial reports are accurate and free from material misstatements.
 Conducted By: External auditors or independent firms.
2. Operational Audit
 Focus: Evaluating the efficiency and effectiveness of business operations.
 Purpose: To identify areas for process improvement, cost reduction, and
better resource utilization.
 Conducted By: Internal auditors or management consultants.
3. Compliance Audit
 Focus: Ensuring adherence to laws, regulations, and company policies.
 Purpose: To confirm that an organization is operating within legal and
regulatory frameworks (e.g., tax laws, environmental laws, labor laws).
 Conducted By: Government agencies or internal/external auditors.
4. Internal Audit
  Focus: Assessing an organization’s risk management, governance, and
internal controls.
 Purpose: To provide management with insights into operational risks and
areas for improvement.
 Conducted By: Internal auditors employed by the company.
5. External Audit
 Focus: Independent evaluation of financial statements and compliance with
regulations.
 Purpose: To provide unbiased assurance to investors and regulatory bodies.
 Conducted By: Certified public accountants (CPAs) from external firms.
6. Forensic Audit
 Focus: Investigation of fraud, corruption, embezzlement, and financial
misconduct.
 Purpose: To gather evidence for legal proceedings or internal disciplinary
actions.
 Conducted By: Forensic accountants and legal experts.
7. Tax Audit
 Focus: Review of tax returns and related records.
 Purpose: To ensure compliance with tax laws and prevent underpayment or
overpayment of taxes.
 Conducted By: Tax authorities (e.g., Bureau of Internal Revenue) or external
tax professionals.
8. Information Systems Audit (IT Audit)
 Focus: Examination of IT infrastructure, security, and data integrity.
 Purpose: To ensure data protection, cybersecurity, and proper functioning of
IT systems.
 Conducted By: IT auditors and cybersecurity experts.

Reasons for Audit

1. Ensure Accuracy
 Audits verify that financial statements and operational records are
accurate and free from errors.
 Helps maintain consistency and reliability in financial reporting.
2. Detect Fraud and Errors
 Audits identify fraudulent activities, misstatements, or discrepancies in
financial records.
 Prevents theft, embezzlement, and manipulation of financial data.
3. Regulatory Compliance
 Ensures that an organization follows legal and regulatory requirements.
 Prevents penalties, lawsuits, and reputational damage.
4. Improve Internal Controls
 Audits assess the effectiveness of internal controls and suggest
improvements.
 Reduces operational risks and enhances security measures.
5. Enhance Credibility and Trust
 Independent audits increase the trust of investors, creditors, and
stakeholders.
 Provides assurance that financial statements are transparent and fair.
6. Assess Performance and Efficiency
 Operational audits evaluate business processes and suggest ways to
improve efficiency.
 Helps in reducing costs and optimizing resource allocation.
7. Tax Compliance
 Ensures accurate tax filings and adherence to tax laws.
 Helps organizations avoid penalties and audits from tax authorities.
8. Support Decision-Making
 Audits provide valuable insights for management decision-making.
 Helps in strategic planning, budgeting, and forecasting.

EXPLAIN STAKEHOLDERS ANALYSIS

Stakeholder analysis is the identification and evaluation of corporate

stakeholders. This can be done in a three-step process.

1. The first step in stakeholder analysis- is to identify primary stakeholders,

those who have a direct connection with the corporation and who have sufficient
bargaining power to directly affect corporate activities. Primary stakeholders
include customers, employees, suppliers, shareholders, and creditors.
2. The second step in stakeholder analysis- is to identify the secondary
stakeholders —those who have only an indirect stake in the corporation but who
are also affected by corporate activities. These usually include
nongovernmental organizations (NGOs, such as Greenpeace), activists,
local communities, trade associations, competitors, and governments.
Because the corporation's relationship with each of these stakeholders is usually
not covered by any written or verbal agreement, there is room for
misunderstanding. As in the case of NGOs and activists, there actually may be
no relationship until a problem develops-usually brought up by the stakeholder.
3. The third step in stakeholder analysis- is to estimate the effect on each
stakeholder group from any particular strategic decision. Because the
primary decision criteria used by management is generally economic, this is the
point where secondary stakeholders may be ignored or discounted as
unimportant. For a firm to fulfill its ethical or discretionary responsibilities, it must
seriously consider the needs and wants of its secondary stakeholders in any
strategic decision.

DISCUSS THE ASPECTS OF AN ORGANIZATION'S ENVIRONMENT THAT CAN

INFLUENCE LONG-TERM DECISIONS AND ARE MOST STRATEGICALLY
IMPORTANT

VRIO Framework

• The VRIO framework is a practical tool to analyze a firm's resources and

determine whether they constitute core or distinctive competencies. Each
resource or capability is evaluated against four criteria:

1. Valuable: Does it provide customer value and competitive advantage?

2. Rareness: Does only one other competitor or preferably do no competitors
possess it at relatively the same level?
 3. Imitability: Do the competitors have the financial ability (viewed in the widest
sense) to imitate?
4. Organization: Is the firm organized to exploit the resource?

EXPLAIN THE VALUE CHAIN AND THE DIFFERENT ORGANIZATIONAL

STRUCTURES UTILIZED IN BUSINESS

1. Primary Activities- These are the core activities directly involved in creating
and delivering a product or service to customers:

 Inbound Logistics: The processes related to receiving, storing, and

distributing raw materials or inputs. Effective inbound logistics can reduce
costs and improve product quality.
• Operations: The processes that convert inputs into finished products
or services. This includes manufacturing, assembly, and other
production processes.
• Outbound Logistics: The activities involved in distributing the final
product to customers, including warehousing, transportation, and order
fulfillment.
• Marketing and Sales: The processes that promote, sell, and deliver
the product to customers. Effective marketing and sales activities
enhance brand visibility and drive revenue.
 Service: After-sales support, such as customer service, maintenance, and
warranty handling. This ensures customer satisfaction and loyalty, which can
lead to repeat purchases

2. Support Activities- These activities enable and enhance primary activities by

providing necessary resources and infrastructure:

• Firm Infrastructure: The organizational structure, management

systems, finance, and legal capabilities that support overall operations.
• Human Resource Management (HRM): The recruitment, training, and
development of employees to ensure the firm has the skills necessary
to compete effectively.
• Technology Development: Activities related to research,
development, and innovation that improve product design or production
efficiency.
 Procurement: The acquisition of resources, such as raw materials or
services, that are essential for production.

• Together, primary and support activities form a CHAIN where each step
contributes to the overall value delivered to customers. By optimizing or
differentiating these activities, companies can reduce costs or increase the perceived
value of their offerings, thereby gaining a competitive advantage.

ORGANIZATIONAL STRUCTURES IN BUSINESS

• The organizational structure- defines how tasks, authority, and resources are
distributed within a company. Different structures are used to support business
goals, respond to environmental changes, and manage resources efficiently.
Common organizational structures include:

a. Simple structure- has no functional or product categories and is

appropriate for an entrepreneur-dominated company with ONE or TWO
product lines that operates in a reasonably small, easily identifiable market
niche. Employees tend to be generalists and jacks-of-all trades.
b. Functional structure- is appropriate for a medium-sized firm with
several product lines in one industry. Employees tend to be specialists
in the business functions that are important to that industry, such as
manufacturing, marketing, finance, and human resources.
c. Divisional structure- is appropriate for a large corporation with many
product lines in several related industries. Employees tend to be
functional specialists organized according to product/market
distinctions.
d. Strategic business units (SBUs)- are a modification of the divisional
structure. Strategic business units are divisions or groups of divisions
composed of independent product-market segments that are given primary
responsibility and authority for the management of their own functional
areas. An SBU may be of any size or level, but it must have;
• a unique mission,
• identifiable competitors,
• an external market focus, and
• control of its business functions.
-The idea is to decentralize on the basis of strategic elements rather
than on the basis of size, product characteristics, or span of control and
to create horizontal linkages among units previously kept separate.
e. Conglomerate structure- is appropriate for a large corporation with
many product lines in several unrelated industries. A variant of the
divisional structure, the conglomerate structure (sometimes called a holding
company) is typically an assemblage of legally independent firms
(subsidiaries) operating under one corporate umbrella but controlled through
the subsidiaries' boards of directors. The unrelated nature of the
subsidiaries prevents any attempt at gaining synergy among them.

EXPLAIN COMPANY'S CORPORATE CULTURE AND HOW AND IT AFFECTS A

PROPOSED STRATEGY

CORPORATE CULTURE

• is the collection of beliefs, expectations, and values learned and shared by a

corporation's members and transmitted from one generation of employees to
another. The corporate culture generally reflects the values of the founders and the
mission of the firm. Culture shapes employees' attitudes toward their work,
influences management styles, and affects how the company makes decisions. It is
developed over time through leadership styles, organizational history, and the
collective experiences of the workforce.

Corporate culture fulfills several important functions in an organization:

 1. Conveys a sense of identity for employees
2. Helps generate employee commitment to something greater than themselves
3. Adds to the stability of the organization as a social system
4. Serves as a frame of reference for employees to use to make sense of
organizational activities and to use as a guide for appropriate behavior.

HOW CORPORATE CULTURE AFFECTS STRATEGY

Corporate culture plays a critical role in determining whether a proposed strategy will
be successful. Here are some ways that culture can impact a strategy:

1. Alignment with Strategic Goals

a. A corporate culture that aligns with a company's strategic goals will
facilitate successful implementation. For example, if a company's strategy
is focused on innovation, a culture that encourages risk-taking, open
communication, and collaboration is essential. Conversely, if the culture is
risk-averse or highly bureaucratic, it will hinder innovation.
2. Decision-Making and Adaptability
a. The speed and approach of decision-making are influenced by culture.
For example, a hierarchical culture may require extensive approvals,
slowing down decisions, which could delay the implementation of a new
strategy. Conversely, a decentralized and empowering culture can enable
faster decision-making, improving adaptability and responsiveness to
strategic shifts.
3. Risk Tolerance
a. Culture defines the organization's tolerance for risk, which affects how
aggressively or cautiously it pursues new strategies. In a risk-tolerant
culture, a company may readily adopt bold or disruptive strategies, while a
risk-averse culture may lead to conservative strategies, potentially limiting
growth opportunities.
4. Collaboration and Communication
a. A collaborative culture that promotes open communication and
teamwork is beneficial for strategies that require cross departmental
cooperation. For instance, a strategy focused on customer-centricity may
need alignment across marketing, product development, and customer
service. If the culture fosters silos or competition between departments,
the strategy may fail to achieve its objectives.
5. Resistance to Change
a. Corporate culture can be a significant source of resistance or support
for change.
b. When a new strategy is proposed, employees may feel uncertain or
threatened. In a flexible and change-oriented culture, employees are more
likely to adapt, facilitating a smoother transition. However, in a rigid culture
that values tradition, change may be met with resistance, leading to
delays or failure in strategy implementation.

FUNCTIONAL STRATEGY AND STRATEGIC CHOICE

• Functional strategy- refers to the specific plans and actions taken within
individual departments or functions of a company-such as marketing,
 finance, operations, human resources, and research & development—
that support the overall corporate and business strategies. It outlines how
each department will contribute to achieving the broader strategic objectives
and ensures that each function operates effectively to reinforce the
company's goals. Functional strategies focus on optimizing resources and
processes, improving efficiency, and achieving specific targets within each
area of expertise.
• Strategic choice- is the process of selecting the best course of action
from several options available to achieve an organization's goals. After
analyzing the internal and external environments (e.g., strengths,
weaknesses, market trends, and competition), a company identifies
potential strategies, evaluates them based on their feasibility and impact,
and chooses the one that aligns best with its vision and resources.

EXPLAIN SWOT DIAGRAM TO EXAMINE BUSINESS STRATEGY

• A SWOT diagram is a strategic planning tool used to evaluate a business's

position in its market. It organizes insights into four categories: Strengths,
Weaknesses, Opportunities, and Threats. This visual framework helps businesses
identify internal and external factors affecting their strategy and decision-making. It
has applications in Business Strategy:

a) Strategic Planning: Assess the feasibility of new initiatives or market entry,

b) Problem Solving: Identify root causes and find solutions to challenges, and
c) Decision Making: Prioritize resources and focus on areas with the most
potential.

EXPLAIN A MISSION STATEMENT THAT ADDRESSES THE • FIVE ELEMENTS

OF GOOD DESIGN

• A well-crafted mission statement aligns with the five elements of good design,
ensuring it effectively communicates purpose, direction, and values. These
elements-clarity, focus, inspiration, practicality, and alignment-are essential for
creating a statement that resonates internally and externally.

• Clarity
b. Element in Design: Simple and easy to understand.
c. Mission Statement Application: Use concise and straightforward language
to avoid confusion.
• Focus
d. Element in Design: Highlights key objectives without being overly broad.
e. Mission Statement Application: Pinpoint core values or goals to ensure the
statement is relevant and actionable.
• Inspiration
f. Element in Design: Evokes emotion and motivates action.
g. Mission Statement Application: Incorporate aspirational goals to inspire
employees, customers, and stakeholders.
• Practicality
h. Element in Design: Realistic and achievable, reflecting actual capabilities
and intentions.
 i. Mission Statement Application: Avoid overly ambitious promises; balance
ambition with feasibility.
• Alignment
j. Element in Design: Supports broader organizational vision and values.
k. Mission Statement Application: Ensure it reflects and reinforces the
company's strategic goals and culture

DESCRIBE A BALANCED SCORECARD TO EXAMINE KEY PERFORMANCE

MEASURES OF A COMPANY

• A Balanced Scorecard is a strategic performance management tool that

provides a comprehensive view of an organization's performance across four key
perspectives: Financial, Customer, Internal Processes, and Learning & Growth.

1. The Financial perspective focuses on profitability, cost management, and

revenue growth, aligning financial objectives with strategy.
2. The Customer perspective examines customer satisfaction, loyalty, and
market share, ensuring that the organization meets customer needs
effectively.
3. The Internal Processes perspective evaluates the efficiency and
effectiveness of critical operational processes, such as innovation, production,
and delivery.
4. Finally, the Learning & Growth perspective focuses on employee
development, organizational culture, and innovation capabilities, ensuring the
company has the skills and knowledge necessary to sustain long-term growth.

By integrating these four perspectives, the Balanced Scorecard helps

companies monitor both financial outcomes and the drivers of future performance,
ensuring a well-rounded approach to achieving strategic goals.

DISCUSS DIRECTIONAL STRATEGIES OF GROWTH, STABILITY, AND

RETRENCHMENT TO THE ORGANIZATIONAL ENVIRONMENT

• Directional strategies guide an organization's response to its environment

and overall objectives.

 Growth strategies- involve expanding operations to capture new

markets, increase market share, or introduce new products, often suited
for dynamic or high-growth environments. This includes organic growth
(internal initiatives) or inorganic growth (mergers and acquisitions).
 Stability strategies- focus on maintaining current operations and market
position, ideal for stable or mature industries where significant growth
opportunities are LIMITED.

These strategies emphasize consistent performance and risk avoidance.

Retrenchment strategies involve scaling back operations, divesting
underperforming units, or cutting costs to stabilize finances, typically used in
challenging environments such as economic downturns or declining industries. Each
strategy aligns the organization's actions with environmental demands to achieve
sustainable success.