Process of Internal Audit and Evaluation of Internal and External Factors in Strategic Planning

This document discusses the process of conducting internal audit and the evaluation of internal and external factors in strategic planning. It covers steps such as identifying what and when to audit, creating an audit schedule, conducting the audit, and reporting the findings. It also highlights the importance of considering both internal and external factors in strategic planning.

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Process of internal audit:
The process of conducting internal audit requires some of the steps which are listed
below:
Identifying what and when to audit- It is required to identify the risky areas of
business that needs to be audited and the risk of process should form the basis of internal
audit.
Audit schedule creation- There should be an advanced notice of the audit to be
conducted by creating an audit schedule.
Pre planning of the scheduled audit- An audit plan is send by the auditors during the
pre planning phase so that information such as objective, criteria and scope is provided (Bell
et al., 2015).
Conducting of audit- The methodology of conducting audit is decided based on
objective and scope of auditors.
Reporting and recording the findings- Another vital step in the audit process is to
record the findings. Documentation of findings generated by audit for identifying the gaps in
compliance so that any deficit is readily fixed is done in the last step (Wolf & Floyd, 2017).
Preparation of audit report also forms an important part of conducting internal audit.
Identification of strength by organization:
Identifying the strength forms part of internal process of audit as it helps in
determining the position of organization within the industry. The gap between the desired and
current position of organization is measured using the gap analysis conducted by internal
audit. Organizational leaders develop strategic objectives depending upon the measure and
cause of gap.

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Evaluation of internal and external factors in strategic planning:
It is not necessary that external factors are more important that internal factors in
strategic planning. However, external factors are as important as internal factors for the
success of organization. Say, an organization planning its product development take into
account internal factors such as budget constraints. Such development would also require
considering external factors such as unemployment rate, economic volatility, government
regulation and higher rate of interest pertaining to specific business (Christensen et al., 2016).
During the global recession, several firms were forced into bankruptcy as they were
not strategically prepared to weather the storm. It was so because they were lacking on their
internal factors such as inefficient operations, poor planning, lack of employee training,
limited budget (Wheelen et al., 2017). Therefore, the downfall was caused by the
combination of both the internal and external factors. Nevertheless, there were companies
that survived the global recession because they had more efficient management and well
trained employees. Hence, it can be said that both the internal as well as external factors are
equally important and should be incorporated in the strategic planning.

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References list:
Bell, T. B., Causholli, M., & Knechel, W. R. (2015). Audit firm tenure, non‐audit services,
and internal assessments of audit quality. Journal of Accounting Research, 53(3), 461-
509.
Christensen, B.E., Glover, S.M., Omer, T.C. and Shelley, M.K., 2016. Understanding audit
quality: Insights from audit professionals and investors. Contemporary Accounting
Research, 33(4), pp.1648-1684.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic
management and business policy. pearson.
Wolf, C., & Floyd, S. W. (2017). Strategic planning research: Toward a theory-driven
agenda. Journal of Management, 43(6), 1754-1788.