PALATAN, Randell Jan M.

BSA35 Operations Auditing Quiz #4

BSA-III-A31A Sir Clyde dela Fuente September 28, 2020

ANSWERS:

1. The 7 Es are effectiveness, efficiency, economy, excellence, ethics, equity, and ecology
which should work together for the success of an organization. Effectiveness establishes
clear bearing and direction for an organization to follow and reach, otherwise the
organization will function aimlessly. Efficiency helps maximize outputs from limited
resources reducing costs and expenses for an organization. The rising and falling
economy requires a company to invest more on the long-term value of their purchases
rather than price. Excellence of products and services must not be compromised in
exchange for lower costs and prices. Ethics play an important role in ensuring
organizational success, without it, organizations will crumble due to corruption and poor
process. Equity ensures that employees and managers are collaborating to meet
organizational mission, vision and goals. Finally, ecology ensures that organizations
comply with environmental laws and practice social responsibility of caring for the eco-
system.

2. An organization’s specific mission, vision, goals and objectives act as identifiable

markers and a destination to reach. By knowing the destination and bearing, the
organization can plan out its strategies and methods to achieve such goals. At the same
time, it can also predict its future costs allowing for better budgeting to achieve such
goals. The concept of effectiveness allows organizations to check whether their actual
results are near or is still geared towards their desired state, and if it is consistently being
achieved through their current strategy and operational plans. If it is, organizations should
continue with their operations, otherwise, they should plan a different strategy.

3. Efficiency, through smart utilization, can be a huge advantage in the competitive business
world. First, if you and your competitions use the same input materials and incur the
same costs, it goes down to who can maximize their resources by producing more quality
outputs with lesser waste and costs. Second, hiring competitive personnel with the proper
skills and knowledge, followed by purchase of better technology, is an investment for the
long-term efficiency of the company. Lastly, better management stewardship creates
higher productivity to meet organizational objectives.

4. The concept of excellence is that organizations must prioritize quality over quantity in
everything that they do, from materials they purchase to the services they render or goods
they sell. This is also applicable in the work performed by internal auditors. Auditors
must assess and evaluate relevant and quality information rather than auditing a high
number of irrelevant information. This not only saves time but develops the quality of the
final audit report. No matter how many audits you perform, or how many information
you audit, if it is poor in quality, then the audit program is not effective and efficient.
PALATAN, Randell Jan M. BSA35 Operations Auditing Quiz #4
BSA-III-A31A Sir Clyde dela Fuente September 28, 2020
Internal auditors must not compromise quality in exchange for low costs. High quality
audit program comes with a price.

5. Ethics in the organization simply differentiates what is right from what is wrong
especially in the decision-making process. Failure to apply ethics in the organization will
produce more problems and ultimately, a short life for the business. This could be in the
form of corruption, nepotism, bias, promotion based on connections with higher
authority, purchasing overpriced products and services to embezzle money, selling
harmful products to the public, and poor workplace environment. An organization’s
whole operation should be integrally founded on what is right, otherwise it is doomed to
fail on the get go. Ethics can be audited in various ways which may include but not
limited to checking the level of transparency of the company, quality control, the state of
public image of the company, and the degree of compliance with the law. Good ethics is
a key to long-term survival of an organization.

6. Equity in the workplace is important to ensure that employees, managers, and leaders
work in collaboration to reach organizational goals and objectives. Equity manifests itself
in operations in various ways, one is having equal treatment to all employees from
managers amidst diversity in the workplace. Discrimination, racism, and bias has no
place in an organization. Second, ensuring and keeping a high level of trust and harmony
between employees and managers through transparency and openness where everyone is
considered. Lastly, everyone in the organization must work and operate in collaboration
with each other to ensure that everyone is contributing to achieving organizational goals
and objectives. Failure to practice these equity concepts will cost an organization to
slowly crumble. The absence of equity makes a disorganized organization who works as
individuals rather than as a team therefore working with conflicting interests and different
directions.

7. Environmental stewardship can be used as an opportunity to create profit. First,

practicing corporate social responsibility can be a tool to build a better image in the
public’s eye through the help of media to gain more prospect investors and customers.
Secondly, it is an effective strategy for an organization to use the concept of ecology as
an excuse to cut costs which is evident in the case of fast-food giants who promote
‘straw-less’ culture and call it environmental care but they actually save a lot of costs that
were then used for straws. This is also evident in companies producing plastic bottles by
reducing the plastics used to produce a single bottle. Lastly, organizations can invest in
renewable energy for cleaner and better energy source such as windmills and solar
panels. Not only will this save them money from utility bills in the long run, it also makes
the organization self-sustainable.

8. Internal audit departments can set goals and metrics in accordance with the 7 Es in its
report by checking the consistency of the operations based on these themes. Internal
auditors may check if the actual state of the organization in these 7 Es is on par with its
PALATAN, Randell Jan M. BSA35 Operations Auditing Quiz #4
BSA-III-A31A Sir Clyde dela Fuente September 28, 2020
desired state and compare how far or near is it from the starting point in the beginning of
the year. Internal audits may measure the 7 Es in various ways: are the established goals
met? Are outputs to wastes ratio reduced? Are employees’ hard work reciprocated with
bonuses? Is there a high level of compliance with the law? Do purchases have high
quality? Just to name a few that can be measured. The audit program can be based on
these themes which will then set a uniform scope and limitation and highlight was has
improved or deteriorated from the beginning of the year compared to the end.

9. During a site visit review, internal auditors can use the 7 Es in various ways to produce
quality audit. They can interview employees regarding their relationship with managers,
if it’s open or awkward, to measure equity. They can interview and observe how
customers are being treated to measure ethics and excellence. They can check financial
statements to determine how much costs are incurred in regards with the outputs
produced to measure effectiveness and efficiency. They can check the physical conditions
of equipment and machineries to determine the level of economy and excellence. Lastly,
they can check the existing programs of a company to practice CSR in the form of
environmental care. There are more ways the 7 Es can help the audit program, asking
relevant questions and evaluating relevant fields will help improve its quality. The
internal auditors can now determine which E is the weakest in the chain and how to
improve it for the growth of the organization.