RIZAL TECHNOLOGICAL UNIVERSITY

Boni Ave., Mandaluyong City

College of Business and Entrepreneurial Technology

ACTIVITY

OPERATIONAL AUDITING

NAME: SANTOS, ANDREW MIGUEL L. DATE: OCTOBER 5, 2020

SECTION: CBET- 01- 502A PROFESSOR: MR. MARKIE GRABILLO

CHAPTER 3

1. What are the benefits of the internal audit function establishing a risk-based plan
when identifying the priorities of the internal audit activity?

One of the benefits when identifying the priorities of internal audit activity is first the
time of essence because you are mainly focusing on significant result therefore you can
strategize your next move along the process. Moreover, it helps to minimize the side
activities, as what I mentioned focusing on main risks can help to have more plans and
prepare for greater risks. Then, more time for depth analysis because you segregate for what
is important and from that there will be deeper discussion of it so there will be an efficient
and reliable audit activity.

2. Describe three ways that internal auditors can better identify the risks related to the
area

One of the ways is to have lists of risks and from that lists removed the individuals who has
limited knowledge and then it squeezes the important or relevant risks. Second, auditor should
expand his thinking regarding the other types of risks because it is our job to enhance our
planning and research skills. However, if we can’t resolve then we must consider a person who
is expert regarding the program or process of risk identification. Finally, consider also the
prepared list by respected organizations because their assessment is much accurate if not it is
specified to determine the relevant risk.
 RIZAL TECHNOLOGICAL UNIVERSITY
Boni Ave., Mandaluyong City
College of Business and Entrepreneurial Technology

3. What are three internal and three external factors affecting a typical organization?
How do these factors affect the future prospects of the organization?

There are three internal factors that can affect an organization these are infrastructure,
personnel, processes and technology. In terms of infrastructure, as we all know that the
infrastructure is subject to depreciation so there is a possibility that the infrastructure can
collapse anytime or can be disposed thereof therefore it can affect in terms of future operations.
Another thing, personnel is belong to the internal factors because if they are underpaid or the
compensation is not enough even though they are performing well so they become demotivated.
As a result, it leads to unproductivity and being idle during working hours. Processes is also
part because if there is a decrease in the cycle time of production then the customers need are
not met so there will be a lesser net income. Furthermore, technology is playing a big role in
this internal factor because we are living in this era where technological advancement is a
catalyst towards the success of the company. If the company didn’t chose to go with flow of
technological advancement then there is a higher possibility that your company will get into
pieces. In the other hand, external factors such as economic, natural environment, political and
environmental. Those factors can affect the company in terms of trade restrictions, fortuitous
event and lower GDP of the country.

4. Describe an event that has transformed or disrupted an industry and include: (1)
An example of an organization that benefited from that opportunity and (2) an
example of another

One of the examples which are disrupted by the technological advancement is Nokia
Corporation. As we all know in our childhood memories, they are the giants during that time
because they are the one who gives birth to a cellphone which is heavy duty, keypad and used
for communication. As the time goes by, the Nokia Corporation disappears in the market
because they are eaten by the other tech giants such as Samsung and Apple simply because they
are the one who transitioned from keypad to touch screen phone. Sadly, the Nokia Corporation
fails to incorporate the said advancement and their sales declined. In the part of the Samsung
and Apple, they capitalized the weakest link of Nokia then the rest is history.

5. List three organizations that provide lists of common vulnerabilities useful during a
risk assessment
 RIZAL TECHNOLOGICAL UNIVERSITY
Boni Ave., Mandaluyong City
College of Business and Entrepreneurial Technology

First is Federal Emergency Management Agency which provides the Mapping Information
Platform and the Risk MAP (Mapping, Assessment, and Planning) to help organizations by
delivering data that increases public awareness and leads to action to reduce the risk to property
and life. Second, US Geological Service (USGS) has a great deal of seismic information to help
organizations identify their vulnerabilities from fault lines, and incident history as a possible
gauge to future activity through probability analysis based on location, time span, and radius
from a designated location. Then, National Weather Service provides rain, hurricane, air quality,
winter storm, flood, and marine weather information, which can have a substantial impact on
the health, safety, and operation of organizational process.

6. List three of the benefits of CSA programs.

One of the benefits of CSA programs is to bridge the gap for who are not knowledgeable
regarding risks and controls. Then, it is rarely adopted therefore we must utilize it because it
helps to identify the major activities in their programs and processes, the objectives, risks and
controls, the individuals that perform key tasks and controls, and the major challenges affecting
these programs and processes. Finally, it clearly helps the management to know the
discrepancies between the process owners did and internal auditors work.

7. Describe three risks that are unique to each of the following two manufacturing
approaches: made to order (MTO) and made to stock (MTS).

In MTS, products are manufactured in advance, while in MTO, the products are produced
after the order is received. By combining the two strategies, organizations can get products to
the customer quickly while allowing some flexibility to be customizable, so customers can
quickly receive products based on their needs. Moreover, in MTO where this methodology
involves manufacturing only after a customer’s order is received, so the process begins when
demand occurs. This is a pull-type supply chain operation because manufacturing is performed
when demand is confirmed. In other words, it is being pulled by demand. The opposite business
model is to manufacture products for stock MTS, which is push type production. At the other
hand, when using MTS, products are manufactured based on demand forecasts. Since the
accuracy of the forecasts will prevent excess inventory on one end, and minimize the
opportunity loss due to stock outs on the other, the issue for organizations is how to forecast
demands accurately.
 RIZAL TECHNOLOGICAL UNIVERSITY
Boni Ave., Mandaluyong City
College of Business and Entrepreneurial Technology

8. Explain why internal auditors should consider bottlenecks, long cycle times,
redundancies, and reprocessing as operational risks.

Bottleneck helps the internal auditor in identifying the areas where accumulation occurs,
evaluating the output of the process, assessing whether each machine used in the production
process is being used to its full capacity, and finding the machine with the highest wait time.
Then, long cycle times because as customer satisfaction gains increased there is a large pressure
to ensure them first and subsequent sales, and it’s improve the organization’s image.
Redundancies are considered as operational risks because doing unnecessary for production
creates inefficiency for the company. Finally, reprocessing is a threat if there is no exact plan
because it is much waste of time.

9. What are the risk implications of outsourcing? Explain why management must
remain vigilant even if a process and related activities have been outsourced to another
organization.

The risk implications of outsourcing whereas most companies used to work with, and obtain
their raw and semi-finished goods from local suppliers, it is commonplace now for
organizations to search the globe for suppliers. This is driven by lower prices and the related
savings, but also because the quality of foreign-sourced inputs has increased in most case.
However, we must remain vigilant because there is some substandard material that we can
receive from the other organization. Another thing, trade restriction can be a factor to be
remaining vigilant.

10. What are some of the practices expected of organizations to fight corruption and
support efforts to decrease institutional corruption?

Actually, there are six ways to fight corruption in your company. First is, commit where
make anti-corruption part of your company culture and operations. Show your employees,
customers and suppliers that your company has a zero-tolerance policy on bribery & corruption.
Then, assess where know your risks and prepare for them. Recognize opportunities to improve
your business by improving compliance. Likewise, define what success means for your
company. Develop goals, strategies and policies and get buy-in from colleagues by clearly
showing the importance of these policies. Moreover, implement where it should be done by
making anti-corruption programmes and policies integral throughout your company, including
your value chain Furthermore, measure for what gets measured gets done. Monitor and measure
 RIZAL TECHNOLOGICAL UNIVERSITY
Boni Ave., Mandaluyong City
College of Business and Entrepreneurial Technology

the impact of your anti-corruption policies to identify what’s working and what still needs work.
Finally, communicate consistently communicate your progress to stakeholders, always striving
for continuous improvement