A frequently used tool in strategy evaluation is the audit. Auditing is defined by the American Accounting Association (AAA) as “a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users”. Since the Enron, WorldCom, and Johnson & Johnson scandals, auditing has taken on greater emphasis and care in companies. Independent auditors basically are certified public accountants (CPAs) who provide their services to organizations for a fee; they examine the financial statements of an organization to determine whether they have been prepared according to generally accepted accounting principles (GAAP) and whether they fairly represent the activities of the firm. Independent auditors use a set of standards called generally accepted auditing standards (GAAS). Public accounting firms often have a consulting arm that provides strategy-evaluation services.
“Planners should not plan, but serve as facilitators, catalysts, inquirers, educators, and synthesizers to guide the planning process effectively.” (A.Hax and N. Majluf)
Two government agencies the General Accounting Office (GAO) and the Internal Revenue Service (IRS) employ government auditors responsible for making sure that organization comply with federal laws, statutes, and policies. GAO and IRS auditors can audit any public or private organizations. The third group of auditors consists of employees within an organization who are responsible for safeguarding company assets, for assessing the efficiency of company operations, and for ensuring that generally accepted business procedures are practiced.
The Environmental Audit
For an increasing number of firms, overseeing environmental affairs is no longer a technical function performed by specialists; rather, it has become an important strategic management concern. Product design, manufacturing, transportation, customer use, packaging, product disposal, and corporate rewards and sanctions should reflect environmental considerations. Firms that effectively manage environmental affairs are benefiting from constructive relations with employees, consumers, suppliers, and distributors. As indicated in the Natural Environment Perspective, J.P. Morgan bank has made environmental policy disuse in its lending policy.
Shimell emphasized the need for organizations to conduct environmental audits of their operations and to develop and should include training workshops in which staff can help design and implement the policy .The CEP should be budgeted, and requisite funds should be allocated to ensure that it is not a public relations facade. A statement of Environmental Policy should be published periodically to inform shared holders and the public of environmental actions taken b the firms.
Instituting an environmental audit can include moving environmental affairs from the staff side of the organization to the line side. Some firms are also introducing environmental criteria and objectives in their performance appraisal instruments and systems. Conoco, for example, ties compensation of all its top managers to environmental action plans. Occidental Chemical includes environmental responsibilities in all its job descriptions for positions.