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

Domain 3

Focus on: Organizational Structures, Business Processes, and Risks (15–25%)

RISK/CONTROL IMPLICATIONS OF DIFFERENT ORGANIZATIONAL STRUCTURES

Organization Defined

An organization is 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. Organizations share four characteristics: (1) coordination of effort, (2) common goal or purpose, (3) division of labor, and (4) hierarchy of authority.

Classifying Organizations

Four categories of organizations exist, although some large and complex organizations have overlapping categories: (1) business organizations, (2) nonprofit service organizations, (3) mutual-benefit organizations, and (4) commonwealth organizations.

Theories of Organization

Two theories exist: the traditional view and the modern view. The traditional view has closed-system thinking, while the modern view incorporates open-system thinking.

Theories of Organizing

Several theories of organizing exist, including bureaucracy, administrative theory, scientific management theory, human relations theory, and contingency design theory.

TYPES OF ORGANIZATIONAL STRUCTURES

Contingency Design Alternatives

Contingency design requires managers to select from a number of situationally appropriate alternatives instead of blindly following fixed principles of organization. Design alternatives include span of ...