What criteria are involved in judging organizational strengths and weaknesses? What is the internal audit approach and why is it important?

Expert Answers

An illustration of the letter 'A' in a speech bubbles

The expert consensus is that the three criteria for judging organizational strengths and weaknesses are (1) past performance of the company, (2) comparison of actual performance against specific goals and targets, (3) comparison of company performance against competitor performance.

Past performance: Past performance analysis shows important information about capabilities and resource use, but it does not show if past performance was executed at the expected level; it measures use but it does not measure under-performance. Measurable statistics in the areas of financial ratios, employee performance trends, production efficiency, and quality control data quantify organizational performance strengths and weaknesses.

Comparison of actual performance with specific goals and targets: This criterion is used to measure performance and under-performance (a category the criterion of past performance does not measure). The company's organizational objectives, vision statement, and mission statement play key roles in measuring actual performance against desired performance in relation to goals and targets. Assessment is made of every area of performance measuring (a) performance compared to organizational goals stating desired outcomes and outputs at all levels and (b) how resources and capabilities are used in relation to fulfilling mission and vision statements, including such areas as resources in customer service.

Comparison of company performance against competitor performance: This criterion is used to measure company performance, or under-performance, in the marketplace they compete in. Assessing what competitors are doing can lead to identifying which strengths and weaknesses can be used to develop the company's own long-term competitive advantage. The tools for gaining information for a comparison with competitors include surveys, subjective opinions of company leaders and consultants, annual reports, professional meetings, and association newsletters. 

Approved by eNotes Editorial Team

We’ll help your grades soar

Start your 48-hour free trial and unlock all the summaries, Q&A, and analyses you need to get better grades now.

  • 30,000+ book summaries
  • 20% study tools discount
  • Ad-free content
  • PDF downloads
  • 300,000+ answers
  • 5-star customer support
Start your 48-Hour Free Trial