Running head: STRATEGIC AUDITING FRAMEWORK 1

Unit 6 Assignment

A Corporate Framework on Strategic Auditing

Dolores Raivzee-Bell

California Intercontinental University

MGT 645 – Strategic Management

Dr. Charlie Williams, Instructor

March 31, 2019

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A Corporate Framework on Strategic Auditing

Introduction

As the author (Arens et. al., 2016) states that in order to make an organization function

properly, so that it may achieve its goals and missions while providing best possible services to

the employees and operating in an environment which proves to be good monetarily, audit is

necessary. So, an audit can be considered as something which proves to be positive for an

organization. The directors and responsible parties (stakeholders, employees, etc.) know several

areas of the business and can share their insights during the audit process. The audit has several

system types and in the various types, there are specific areas (relating to the type of audit that is

being carried out) of the organization which are generally gathered, checked then analyzed.

An organizational or business framework is something which can be regarded as a

“systematic way” of an organization to carry out the operations which are being implemented in

the organization. The framework is necessary in order to grow substantially and build a high

performance level as stated by (Papazoglou et. al., 1992). An organization must have the proper

organizational framework to maximize its operations and to make parts perform properly. Also,

it is important for all involved (stakeholders, employees, board of directors, senior management)

to have a positive relationship beginning and during the framework process. A corporate

framework can be defined as the rules and regulations that the board of directors decide, which

are practiced in order to have a meaningful relationship with its stakeholders.

In order to check the validity and effectiveness of a corporate framework, an audit must

be conducted so that various areas of the business can be gathered and analyzed. If any

modifications or changes are needed, they can made prior to implementing so the communication

channels and credibility of the organization is maintained. The strategic audit of a corporation
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framework by Wheelen, Hunger, Hoffman & Bamford (2018) will be analyzed and discussed

with concluding comments.

The Strategic Audit of a Corporation Framework

Strategic audit is the term used for determining and analyzing a company’s business plans

and different strategies which are going to be operated and worked on. As the foundation of a

business or organization is being developed, there are certain requirements needed to make sure

that the organizations “risk” are lowered during the worst case scenario. In order to avoid such

scenarios, an organization or business should develop a “back up” plan so that if the channels of

operations are not executed properly, then other strategic measures would be in place to keep the

productivity running until additional revisions are made.

A strategic audit is the analyzation of the organization’s strategies and different plans as

the author (Morton, 1993) which explains how a strategic audit can be carried out in several

ways and in various companies (local, global). The strategic audit, reveals the outcomes of the

strategy that the organization is following and identifies any shortfalls or weaknesses so that

those areas can be eliminated. The audit also provides the company the opportunity to progress

significantly if the shortfalls have been analyzed and reported. This provides management with

information needed to make the appropriate changes needed without effecting the overall

operation of the business.

There has been several research reports on strategic audits which provides positive and

negative benefits when used in businesses. As stated by (Lindblad, 2017), one type of audit is

known as internal audit, which is considered to be an ongoing audit as business owners have to

conduct the process on a regular basis. In addition, the audit provides a summary report which
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compares the current performance of a business in order to project future performance measures

which can be achieved when the strategy is being followed properly.

A company’s strategic audit framework determines the relationship between the

organization and its stakeholders and has a positive effective in forming a positive relationship

in order for a company to grow and with regards to a small business, a strategic audit can be vital

so that the business can develop growth measures to expand. As stated by (Harford et. al., 2012),

“the corporate framework lies within the corporate governance as both of these things are based

on each other and helps the board of directors or owners decide about the terms and conditions of

dealing with the stakeholders of the organization or a business”. In order to have a positive

relationship with stakeholders, a business or organization should have a strong audit framework

that should prove to be beneficial while not damaging the financial goals of the of the company’s

vision.

The sector of the organization which handles the corporate governance is usually made

up of board of directors as they are considered “owners” of the organization. The board decides

the direction that the organization is going to have with company management and stakeholders.

As stated by Gibbs (1993), corporate governance plays an important role in the outline of the

strategic audit because it determines and enhances the relation with the stakeholders which has

been positive in building strong productivity and gaining certain knowledge of the company

which can be a supportive measure in marketing and building of the company’s workforce.

Analyzing the Strategic Audit of a Corporation Framework

By Wheelen, Hunger & Hoffman

The importance of a strategic audit and the framework has been discussed. We now look

at the research outline was conducted by Wheelen, Hunger, Hoffman, & Bamford (2018). The
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authors made various points on strategic auditing which yields an analytical approach as how the

audit is based on the need of the company. These points include queries which have to be

answered and analyzed during the audit in order to come on the results and conclusions. The

audit contains specific queries about company which relates to: (1) Current issues/situations, (2)

Corporate governance, (3) External environment, (4) Internal environment, (5) Analyzing the

operations, and (6) Analyzing different and all factors. As stated by the authors (Monday et.al.,

2015), an “audit provides a detailed information about the business’s field on what it has been

carried out”. The criteria of the strategic audit provided by Wheelen, Hunger, Hoffman, &

Bamford (2018) can be used to analyze any sort of business because it has questions and queries

which can prove to fulfill the requirement of an audit whether it is conducted within a small or

large business. The strategic audit can be used to analyze the framework of a business because it

offers extensive research of all areas within a business and from the research an analysis findings

can be used to show how the business will be able to grow and move forward.

A strategic audit is used when a business needs to review and analyze the strategies in the

plan and to look at the strengths and weaknesses so that changes or modifications can be made

for a successful implementation. All of the information gathered is included in the plan to

discuss with management and board of directors. The plans outlined should focus on all areas

that are critical to the success of the business goals (Goergen et al, 2016). The model plan is

verified by management and the board so that is aligns with the priorities set.

The strategic audit process incorporates looking at how to effectively evaluate all areas of

a business then create a comparisons analysis of every area which can assist in the development

course for implementation. This process can result in successful environmental change in the

business. The strategic audit process is also important for businesses/companies looking to
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expand and seeking new product or service opportunities. Presenting a strategic audit plan shares

those findings with the board, stakeholders, and management on any pros or cons for the new

expansions or products before investing any financial or merger protections (Swartz, Elliott, &

Herbane, 2003). In the long run, a strategic audit can be a successful tool to “protect the busi-

ness assets and finances while keeping the vision of the business at the forefront” (Goergen et al,

2016).

According to Wheelen, Hunger, Hoffman, & Bamford (2018), “a strategic audit for a

business is a suitable and reliable framework that allows accountants to conduct a strategic

auditing despite the type of business”. This essay looks to identify the importance and the value

of businesses using a strategic audit and the how the framework is developed and processed

within a business.

Objectives of Strategy Audit

There are various objectives of a strategy audit. The first is how a business gathers all of

the systems (marketing, financials, staffing, management, and internal/external assets, etc.) and

how all systems are utilized to develop the business objectives. The second area looks at how

the strategy audit will be applied within the business plan to direct and map how the business

will begin the audit process (Gibbs, 1993). It is important in this phase to make sure all staff

members, executive management and stakeholders are all in favor of the strategy audit within the

business plan design. In the third objective focuses on how management has received all the

relevant information needed to assess and design the strategy audit. The final objective will

produce various data from assessing the business departments and products, etc. to see if the

strategy is covering all areas and changes, if needed (Gibbs, 1993).

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Based on the design and framework of the strategy audit, Wheelen, Hunger, and Hoffman

(2018), has identified how the board of directors have various responsibilities that play a role in

the framework design. The board works closely with all investors and business partners in order

to see if the vision and strategic objectives benefit everyone involved. The senior executive or

Chief Executive Officer (CEO) is involved in all management aspects while making sure all

parties involved are kept abreast ono the implementation process. The CEO may need to review

internal/external resources to assist in the audit process, but overall, the governing boards

oversees every aspect including the CEO and all senior management. The purpose is to make

sure all areas are executed correctly. If the CEO senior management does not show the

competency needed to differentiate all areas of the strategy audit, the board can terminate those

individuals and seek new individuals to make sure the goals and objectives are implemented and

daily operations are running smoothly.

A reason why a strategic audit is conducted in a business is that it allows the evaluation

and control of all organization's operations (Swartz, Elliott, & Herbane, 2003). A holistic

strategic audit of corporation framework is exceptionally useful when utilized as a diagnostic

tool to appraise the current situation, identify the strengths, weaknesses, opportunities, and

threats of the organization.

Because the board is involved in the formulation and implementation of various corporate

strategies, this framework is suitable for the strategic audit process. The standardized procedure

requires managers to inform the directors on the evolvement strategy and respective structure

during every annual meeting that is dedicated to the purpose supposed to carry out (Hurreeram,

2007).
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The framework allows the business to “create a mutual and formal method in the current

governance system such that the board carries out its responsibilities of strategic oversight in a

proactive manner” (Hurreeram, 2007).

Establishment of the Criteria

According to Agbejule & Jokipii (2009), the strategy audit corporate framework is

unique and has a distinctive viewpoint on the strategy. Management has the role of monitoring

all operations of the audit process and put it into action. Therefore, managers must provide the

focus and vision of the strategic framework and provide the necessary training and skillsets that

employees need in order to maximize productivity and increase revenue. The strategic audit is

not based on management or employee performance measures, but on the profits gained from the

strategy framework for increasing profits (Rhode & Packel, 2014). The framework allows the

establishment of criteria as an element of the strategic audit. The selected framework criteria

should be familiar to everyone in the company and is seen as a standard indicator of the

organization's financial performance (Lee, 2016). The framework gives the board an ultimate

role of understanding the impact of the chosen strategy based on the value of the investment.

For the strategic audit to be successful, there must be a criteria that selects the best

framework for the company to follow. The selected framework style allows the company to

view a profitable rate of returns on all shareholders who invest provide financial capital to the

company. Also, the criteria selected will allow internal and external auditors to make

comparisons which are related to company’s income flow compared to similar companies with
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the same products and services. The data derived from the audit framework helps to identify if

the company's chosen strategy path will eventually generate a return on investment for stake-

holders that can be equal or surpass that of other companies (Lee, 2016).

Database Design and Maintenance

A successful strategic audit process requires that the board controls both the criteria and

the organization's database. The criteria are kept and maintained in the company's database, and

therefore there is need for the company hire someone to manage the database systems (Lee,

2016). One of the problems that external auditors face while appraising the performance of a

specific strategic path is that the management perspectives filter all the required information they

usually get.

An effective strategic audit process depends on the way organization assembles and

maintains its data in the short term and long term periods and who carry out that task on behave

of the board. The corporation framework allows the organization to employ an outside person to

design the company's database and also assemble all the data board considers them of at most

importance (Lee, 2016). The framework also allows the participation of internal auditors to

provide with necessary information while designing the database.

The Strategic Audit Committee

The corporation framework allows the formation of the strategic audit committee to

oversee the whole process. A successful and sustainable process is derived from delegating

specific leadership and role to specific people of the board similarly to how committee does. The

committee selects the specific criteria for auditing the strategic performances.
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The External and Internal Environmental Assessment

The primary mission of every corporation is to offer distinct products and services to its

respective client at a better value to that of its competitors in the industry. Without outlining a

strategy, the “resources will be wasted, there will be unforced employees, and consequently, the

overall mission and objective will be underachieved” (Arens et al. 2016). The corporate

framework enhances external environmental evaluation that offers to any organization key

external connecting link between the clients, rival organizations and the services/products it

provides.

The corporate framework facilitates an effective reviewing of existing organization's

materials. The present business plan and all other related strategy materials are audited to make

clear the important part of the organization's potential document is extensively documented.

Through this process, all weaknesses and shortcomings in the current materials are discovered

(Van der Wiele et al.2001).

Conclusion

The research and documentation provided by Wheelen, Hunger, Hoffman & Bamford

(2018) is a positive blueprint for how a company should carry out a solid strategic audit for all

types of businesses. The background, strategic outline, and implementation processes have been

discussed in while shedding light on the corporate governance and the framework. The strategic

audit developed by Wheelen, Hunger, Hoffman, & Bamford (2018) is perfectly suitable for

carrying out audits in any type of business which are based on international level or any local
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business being run by a single owner, as the queries in this audit enables the auditors to gain

information about different areas of the organization which prove to be useful during the audit

and then base the result of the report on it. A strategic audit and how it is framed can have a

positive outcome for the success and growth of a company.

References
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