CH05-Illustrative Solutions-v.4 - CHAPTER 5 BUSINESS PROCESSES AND RISKS Illustrative Solutions REVIEW QUESTIONS 1 A business process is the set of

CH05-Illustrative Solutions-v.4 - CHAPTER 5 BUSINESS...

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CHAPTER 5 BUSINESS PROCESSES AND RISKS Illustrative Solutions Internal Auditing: Assurance & Advisory Services , 4th Edition © 2017 by the Internal Audit Foundation, 1035 Greenwood Blvd., Suite 401, Lake Mary, FL 32746, USA Page 1 REVIEW QUESTIONS 1. A business process is the set of connected activities linked with each other for the purpose of achiev- ing an objective or goal. Operating processes are the core processes through which the organization achieves its primary objectives. 2. Unlike business processes, which operate on a continuous or periodic basis, some organizations may use a different method to organize value-creating activities. This structure, called projects, is used when activities happen over an extended period of time, require a complex sequencing, and are rela- tively unique in that a specific activity is not done continuously. Examples of organizations that often set up their core activities in this manner are engineering and construction firms; mining, oil, and gas companies; and defense contractors. 3. Two general types of business processes are present in most organizations that deliver goods and services: the operating processes and the management and support processes. The operating processes include strategic planning, product and service design and development, marketing, production/ delivery, invoicing, and collection. The management and support processes include obtaining and managing the organization’s human resources (this could include hiring, training, benefits), managing financial resources (including budgeting, financial accounting, treasury), managing the information technology resources, managing physical resources (facilities management, security, maintenance, etc.), the organization’s compliance and governance systems, and the process for managing the organi- zation’s external stakeholders (government relations, public relations, etc.). 4. A company’s business model includes the objectives of the business and how the business processes are structured to obtain those objectives. It also includes the company’s mission and values as the bound- aries in which the business will operate (for example, target markets, supply and delivery channels, geographical regions). The model also would include the more tactical goals such as annual budgets and targets. 5. A top-down approach begins at the entity level with the organization’s objectives, and then identifies the key processes critical to the success of each of the organization’s objectives. A bottom-up approach begins by looking at all processes directly at the activity level, and then aggregates the identified pro- cesses across the organization. 6. The key objectives for a process can be identified by determining the following for the process: a. Why does the process exist?

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