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Pros and Cons of using the Strategic Audit
Financial analysis of a company must include appraisals of the operating statements over a period of five years. This investigation should focus on the trends of the earnings for each share, the sales, profits, return on investment, and debt-equity ratio among other factors that determine the success of a business (Wheelen et al., 2015). Some of the steps that are involved during the process of financial analysis include an examination of the historical income reports, as much of the required data for analysis would be contained in such documents. Cash flow statements are vital statements that should be insightful during the review. The strategic audit is indicative of the changes that have occurred in the various departments and the entire organization between given timelines, showing the percentage change and making adjustments to cater for inflation where necessary (Healy & Palepu, 2012).
The strategic audit analysis discloses the health of the organization by looking at the trends in the financial statements like the increase or decrease of sales and the costs of products sold. Such disclosures should allow further investigation to establish the cause of the trend. This analysis typically works for organizations that have divisions in the same economy or region (Healy & Palepu, 2012). The review of multinational firms like Wal-Mart gets complicated owing to the diverse accounting standards and strategies. Nonetheless, strategic audits are an essential part of understanding how the company is performing and is a significant part of performing a SWOT analysis (Wheelen et al., 2015).
The most obvious negative about using the strategic audit emanate from the fact that the user may use it almost automatically. For example, one may unthinkingly use all questions in the audit list even when they are not relevant to the particular situation and that there may be other more significant and relevant questions that need to be addressed but are not in the list of the audit questions (Wheelen et al., 2015).
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