Wiley CIAexcel Exam Review 2014: Part 3, Internal Audit Knowledge Elements

DOMAIN 3

Organizational Structure, Business Processes, and Risks (15–25%)

3.1 Risk/Control Implications of Different Organizational Structures

3.2 Types of Organizational Structures

3.3 Schemes in Various Business Cycles

3.4 Business Process Analysis

3.5 Inventory Management Techniques and Concepts

3.6 Electronic Data Systems

3.7 Business Development Life Cycles

3.8 International Organization for Standardization Framework

3.9 Outsourcing Business Processes

3.10 Sample Practice Questions

3.1 Risk/Control Implications of Different Organizational Structures

Organizations with common characteristics and classifications and different organization charts are discussed in this section.

(a) Organization Defined

(i) What Is an Organization?

Organization and management theorist Chester Barnard defines an organization as “a system of consciously coordinated activities or forces of two or more persons.” In other words, when people gather together and formally agree to combine their efforts for a common purpose or goal, an organization is the result.

The purpose of the management process is to achieve organizational objectives in an effective and efficient manner. According to Edgar Schein, a prominent organizational psychologist, all organizations share four characteristics (see Exhibit 3.1).

EXHIBIT 3.1 Common Characteristics of Organizations

Coordination of effort is based on the idea ...