1.

Cite an example of a usual operational problem of a manufacturing firm and how will

Operational Auditing help to resolve that problem?

Manufacturing companies are those that engage in the transformation of goods,

materials, and other substances into a new product. It creates physical goods often with

the use of machinery and equipment. In this line of business, one of the common

operational problems they might face is inventory management. It is the process of

acquiring, storing, and selling inventory. It is used by many to minimize shortages,

overstocking, and other costly issues.

Nowadays, inventory management has been easier for many manufacturing

companies. With the help of technology, a time-consuming task before can be now

simplified. However, this is easier said than done especially for small manufacturers.

Small manufacturers still resort to the manual process which is inefficient and prone to

mistakes. This will result in inaccuracy, shortages, excess, and unidentified losses.

The goal of operational auditing is to assist companies in maintaining effective

controls by evaluating their effectiveness and efficiency and by promoting continuous

improvement. In relation to this, keeping in mind to review and safeguard inventory has

been a mandatory requirement for internal auditors. They have the responsibility to check

the company’s actual inventory level against the financial records. This is a simple but

time-consuming process because usually, they have to manually count physical stock

levels and cross-check against the record.

Internal auditors usually performed inventory on a regular basis to identify

discrepancies and avoid unnecessary purchases of raw materials and equipment. They
 must guarantee that there are enough raw materials for production and that all completed

goods are ready to be delivered to customers. Once the company reached a good level of

inventory control, it may improve the efficiency of their production thereby, reducing the

costs without compromising the quality of the products.

2. On a Merchandising Company, what are the risks involved and how would you assess the

level of those risks that you will mention?

Merchandising companies are those engaged in buying and selling products. Their

goal is to influence the customers to buy their products to make a profit. Like other

industries, merchandising companies also face a lot of issues and risks incorporated with

it.

Risk Description Impact Risk Level

Inability to The business will not operate without a Severe Hight

Obtain supplier. It affects inventory management and
Supply is crucial to making your customers
continuously make purchases. Having the
supply chain cut-off may also be because of
natural disasters or fortuitous events.

Damaged If the inventory is defective or damaged, it will Significant Moderate

Inventories not be able to sell at the market price. If this
continuously happens, the business will have
to deal with a huge amount of costs that may
result in a loss. Like in the previous risk,
unexpected events like natural disasters may
wipe out the entire inventory of a business.

Risk of The risk of failing the business is applicable in Severe High

Failure any industry. It is an inherent risk where the
sales do not exceed the cost of producing and
promoting the products.

Theft Theft is a highly typical event that costs Significant Moderate

businesses a huge amount every year that may
result in bankruptcy and closure. Most of the
 time, employees are responsible for stealing
inventories. It could also be a third party.

Product It refers to the liability of the reseller to pay Significant Low

Liability additional costs for selling defective products
to the customers.

Once the level of risks has been identified, the business has to take appropriate

action to eliminate or at least, mitigate the risks. After putting controls in place, reassess

the risks to determine whether the said actions are effective or not.

3. For a Hotel and Restaurant Company, which among the 7Es will be applicable to them

and why?

Hotel and Restaurant Companies belong to the industry of services. It doesn’t

have a concrete and specific definition but it can be reduced to the simple act of making

someone feel welcome. This kind of industry includes businesses engaged in hotels,

resorts, restaurants, etc., from big chains of hotels to the smallest dining establishments.

The history of the hospitality industry starts from the sacred rule of hospitality called

xenia which means respect from hosts to guests and respect from guests to hosts.

The goal of the hospitality industry is to provide customers an enjoyable and

memorable experience whether it is from a delicious dinner, unwinding in a luxurious

spa, or getting a good night's sleep away from home, ensuring sure each guest is well-

taken care of. That’s why in my opinion, among the 7Es, excellence is the most

applicable for a hotel and restaurant company.

Excellence is basically defined as high-quality. In a work setting, no one doesn’t

go to work every day aiming to produce mediocre results. Everyone is focused to equip

themselves with the knowledge and skills necessary to create desired results. In the
 hospitality industry, it requires a lot of excellence specifically in delivering service to the

customers. Most of the time, there is a hospitality manager that oversees various

departments of the hotel or resort that ensures that the operations are running smoothly.

They have to meet the expectations of the customers at an average level because once

you go above or beyond, the results will fall back to you. According to Cayuga

Hospitality Consultants, the excellence and expectations vary depending on the brands

similar to luxury brands of a product versus to the brands that are affordable by everyone.

Businesses in this industry also have their own branding such as luxurious, economy,

commercial, etc. Overall, the goal here is to provide an excellent service, find the correct

balance between the costs and the quality you provide, and the rest of the 7Es will follow.

4. Select a Government Agency, cite an operational problem and choose and apply an

Operational Auditing Tool discussed and how will it be useful to that Gov't Agency.

The government agency that I will choose is the Department of Education and the

Commission on Higher Education. These agencies are both responsible for ensuring

access to, promoting equity in, and improving the quality of both basic and higher

education in the Philippines. I chose these two agencies because they are held responsible

for the implementation of online learning last year and now, they approve the launching

of face-to-face classes again in the country. I am not sure if this is an operational problem

but I believe that their decisions lack compassion and are irresponsible against the

Filipinos.

The tool that I will choose is the check sheet. It is a structured document that is

widely used to collect and analyze data. In relation to the government agencies, they
 should have done a checklist before they implement the online classes. They should take

into consideration the capacity and accessibility of everyone to have and use digital tools

to support online learning. It has been pushed further as the only solution to address the

problem of continuing the learning while in the middle of the pandemic. As I’ve

mentioned before, it is a must for them to oversee and check whether everyone in the

country can afford online learning. The same goes with the implementation of face-to-

face classes. It is obvious that the country is not ready for it. The students and their

families will have to adjust once again because the health and safety of everyone are at

stake. Just like what happened in the implementation of online learning, I think only

those who have privilege will afford to go back to face-to-face classes. These agencies

have to make sure that once the students go back to traditional learning, the schools and

universities are fully prepared and equipped with their strategies, facilities, etc to make

sure that COVID-19 will not surge once again. They can do a survey or cross-check to

know the capabilities of the schools and universities, especially for urbanized areas. Even

though most of the students are vaccinated, they should not rely on it and think of other

factors that need to be taken into consideration.

References:

Chelsea Levinson. June 2018. Definition of the Manufacturing Industry. Retrieved from

https://bizfluent.com/facts-6853113-definition-manufacturing-industry.html
Cvent. December 2020. What Is the Hospitality Industry? Your Complete Guide. Retrieved from

https://www.cvent.com/en/blog/hospitality/what-is-the-hospitality-industry

Edouard Thieuleux. (n.d.) 10 Common Inventory Management Supply Mistakes. Retrieved from

https://abcsupplychain.com/inventory-management-mistakes/

Fishbowl. (n.d.) What is Inventory Control? Retrieved from

https://www.fishbowlinventory.com/solutions/inventory-control

Gregory Hamel. 2019. The Disadvantages of Merchandising. Retrieved from

https://smallbusiness.chron.com/list-common-examples-merchandising-11760.html

Kanya. November 2018. 7 Common Manufacturing Challenges & How to Overcome Them.

Retrieved from https://www.hashmicro.com/blog/overcoming-common-manufacturing-

challenges/

Kristina Lopienski. August 2019. Inventory Audit Procedures, Challenges, & Best Practices.

Retrieved from https://www.shipbob.com/blog/inventory-audit/

Melanie. April 2018. 5 Factors that Spell Supply Chain Failure. Retrieved from

https://www.unleashedsoftware.com/blog/five-factors-spell-supply-chain-failure

Rebecca Webb. May 2020. 7 Risks Wholesalers Must Prepare For. Retrieved from

https://www.clearrisk.com/risk-management-blog/7-risks-wholesalers-must-prepare-for

Revfine. (n.d.) Hospitality Management. Retrieved from https://www.revfine.com/hospitality-

management/