Advantages Of Internal Audit

The Internal Assessment

For an organization to devise a strategy that would capitalize an opportunity existing in the market or create an opportunity, it needs to be aware of the internal strengths and weaknesses of its own.

To understand the ability of the firm; whether it has the potential to overcome weaknesses that would hinder the success of any strategy formulated or the strengths that would help them to fulfill the strategy and develop a competitive advantage over other firms.

Internal Audit

An internal audit of the firm which isn’t much different from an external audit and helps an organization to obtain an analysis of the firm’s abilities and difficulties to help the organization in strategically planning its activities.

An Internal

 Product and Service Planning: With the increased awareness and extensive customized demand for goods and services, an organization needs to produce products and services that would meet the requirement of the customers.

Example: Accessibility, User-friendliness etc.

 Pricing: Pricing is a convoluted process and its computation differs to the class of people targeted, Government, Suppliers, Distributors and competitors. Depending upon the above, including the price of substitute products and the kind of disposable income available to the customers, a company’s strategy will be affected.

 Distribution: The channels through which the product is dispersed and made available to customers, including the storage costs and the distance between where the production is completed and where the product is made available influences the strategy that will be considered and undertaken by managers before adopting it. Marketing Research: Ability of an organization to evaluate its efforts and find faults in its process of marketing to rectify and preserve wastage of unnecessary funds will enable a firm to formulate an effective

Value Chain Analysis

Every process in the organization adds value to the operations of the organization. Be it, production or services.

Value chain analysis could therefore be understood as the process of understanding the residue (profit) by understanding the relationship between total revenue and total costs incurred to earn that revenue.

A successful Value Chain Analysis helps an organization to identify key areas that are significantly important for managing time and costs involved in operations.

Every method mentioned above is a requirement that every company needs to undertake in order to measure its performance. These methods needs to be analyzed in order to perform INTERNAL AUDIT of an organization and understand the capacity of the organization before formulating any strategy or exploiting an opportunity.

The Internal Factor Evaluation (IFE) Matrix

The IFE Matrix involves listing of all the strengths and weaknesses found in the Internal Audit process in an order starting from strengths and then weaknesses.

It is then assigned weights starting from 0.0 (which is not important) to 1.0 (all-important) to each factor listed.

These factors are then rated from 1 to 4; 1 being a major weakness and 4 being a major