Analysis of Toyota Motor Corporation - Example

Area Item Unit FY2011 FY2012 FY2013

Consolidated net revenues for Toyota Motor Corporation and its operating income are presented below.

TOYOTA’S IT AUDIT PLAN

IT strategy and governance are both critical for successful enterprises. Company executives must frame strategies and governance plans and various accompanying policies or procedures with the aim of concurrently enabling the company achieve strategic vision, support its audit requirements, manage its risk, and display responsible financial management. There are number of formal audit processes which are utilized in determining whether IT governance and strategy are performing as intended and Toyota Motor Corporation has adapted this plan for a number of years to increase its efficiency.

IT Audit Plan Process

Understanding the Business

• Identifying the company’s strategies and objectives.
• Recognizing risk profile for the company.
• Assessing the way in which the company structures its operations.
• Comprehending the IT service support model.

Defining the IT Universe

• Analyzing business fundamentals.
• Isolating significant applications which sustain the company operations.
• Distinguishing critical infrastructure for significant applications.
• Appreciating the role of the supporting technologies.
• Categorizing major projects as well other initiatives.

Performing Risk Assessment

• Evaluating the company and IT processes to identify existing risks.
• Assessing risks and ranking audit subjects with the use of IT risk factors.
• Assessing risks and ranking audit subjects with the help of business risk factors.

Formalizing the Audit Plan

• Choosing audit subjects and grouping them into distinct audit actions.
• Establishing audit cycle and existing frequencies.
• Attaching appropriate actions grounded on opportunities for consulting and management requests.
• Confirming the plan with the management team.

Internal Audit Charter, commonly referred to as “The Charter” is a Toyota Astra Financial Services (TAFS) management authorization manual used for internal audit functions. It defines the company’s internal audit reporting and outlines its role. Internal audit standards, procedures, policies, and other managerial practices are documented in the manual.

From the Charter, the company’s internal audit mission is outlined. In comprises efforts to assist the management in identifying and mitigating risks through an objective and independent evaluation of adequacy and effectiveness of existing internal controls and processes. The Charter aims at enabling the company achieve its objectives and safeguard its value and reputation by means of effective provision of consulting services and quality assurance.

The Board of Directors (BOD) has the general responsibility over Toyota’s internal control. Internal controls are intended to manage, and not eliminate business risks. It helps in safeguarding the company assets against fraud and other irregularities as well as give a reasonable and yet not absolute assurance against loss or material misstatement (Liker, 24).

Under the guidance of both the president director as well as his vice, internal audit assists the BOD to review the operation and effectiveness of the Toyota’s systems of internal control and its procedures. Internal audit functions are managed by the Internal Audit Head who is appointed by the president director with endorsement from BOC. The president director can terminate the Internal Audit Head with the approval of BOC should the Internal Audit Head fail to fulfill his or her responsibilities as stated in the Charter. Internal Audit Head reports to the president director and his vice. It is required that the Internal Audit Head as well as the Internal Audit staff members shall not take up any operational functions in the Company. Standards The Charter and other internal audit standards observes the International Standards for Professional Practice of Internal Auditing that is issued by The Institute of Internal Auditors.

Risk Analysis

The operational and other risks being faced by Toyota Motor Corporation has the ability to considerably influence investor decisions.

High Competition in the Worldwide Automotive Market

Global automotive market is highly competitive. Owing to this factor, Toyota faces intense competition from other automotive manufacturers in the markets that it operates. While the global economy is has gradually recovered, competition in automotive industry intensifies amidst overall difficult market conditions. Moreover, competition is likely to intensify even more in light of the continuing globalization in global automotive industry, perhaps resulting in even further industry reorganization. Some of the factors that lead to competition comprise of product features and quality and features, reliability, safety, fuel economy, pricing, the amount of time required for development and innovation, customer service as well as the financing terms. Greater competition can lead to lower vehicle unit sales, causing further downward price pressure and unfavorably affect Toyota’s results of operations and financial conditions.

High Volatility in the Global Automotive Industry

All of the markets in which Toyota competes is subject to substantial volatility in demand. Demand for vehicles hangs to a large extent on economic, social and political conditions in a specific market as well as the introduction of new technologies and vehicles. Since Toyota’s revenues are gotten from sales in global worldwide, the economic conditions of such markets are highly important to Toyota. For instance during fiscal year 2010, even though the government tried to stimulate demand in the main markets (Japan, Europe and North America) resulted in an economic recovery trend, market conditions in these continued to be difficult and Toyota Motor Corporation was undesirably affected by variations in market structure, with increased shifts in consumer demands towards low-priced vehicles. Toyota’s financial results of operations and conditions may be undesirably affected if the weakness in demand for automobiles and changes in market structure persists. Demand is also affected by factors which act directly on vehicle price and the cost of purchasing or operating vehicles such as the cost of fuel and governmental regulations (imports regulation, tariffs and other taxes), sales and financing incentives, prices of components, raw materials and parts (Martínez & Manuela, 691). Volatility in demand might lead to low vehicle unit sales, which may result in additional downward price pressure and negatively affect Toyota’s results of operations and financial conditions.

UTILIZATION OF CAATS

Computer assisted audit techniques (CAAT) encompasses computer programs and data that is by auditor when undertaking audit procedures to process audit significance data contained in a client computer information system (CIS). Most audit software contain computer programs used for audit purposes and to process data audit significance from the client accounting system.

CAATS Applied to Revenue Cycle

There are several ways in which a revenue cycles system can be computerized. In the simplest form, automation technology is used to increase the efficiency and effectiveness of tasks. In this case, technology does the same things done by manual systems. At its extreme, business processes and work flow are carefully examined and re-engineered. When it comes to re-engineering there is the identification and elimination of tasks that do not make a difference.

Re-engineering Sales Order Processing with Real-Time Technology

There is need to develop computer systems that operate in real-time. For Toyota, many of the formerly manual steps are now automated and much of the “paper trail” is gone. It therefore means that a computer program evaluates the customer’s credit based on the chosen criteria decided by the credit manager and the programmed into the system. Re-engineering of cash receipts process is basic to the concept of re-engineering is operation streamlining. Point-of-Sale (POS) Systems involves the scanning the sales items. The system calculates tax, total and others. Inventory is also abridged in real-time. A sale becomes complete when a customer tenders payment. Credit card sales are approved online like checks, after which a sale is automatically recorded in a sales journal. Control of cash in a POS system is very strong than in the traditional sales systems. Ultimately, POS systems greatly enhance cash receipts processes.

Specific use of CAATS in Toyota Motor Corporation

• Detection of system violation rule – Program checks and ensures that customer credit limit does not except the one set.
• Calculation of checks - Program gives total amount of individual entries in the purchases day book, as an auditor agree with the amount posted in purchases ledger control a/c.
• Detection of unreasonable items – Checks ensure that sales ledger balance (that is the debtors balance) is not more than the amount of good delivered to customer.
• Completeness checks – It checks for the continuity of sales invoices so as to ensure that they are accounted for.

The audit test data is data for the company’s analysis which is submitted by the auditor for processing by clients computer based accounting system with the aim of testing the operation of an enterprise’s computer programs.

CONCLUSION

From the current paper, it is clear that Toyota should continue undertaking concerted efforts that it can raise its corporate value, strengthen its management platform and generate more revenues. Internal audit procedures should be observed, with the aim of controlling fraudulent activities in the firm. As an immediate tasks, Toyota should promote both business and cost structure reforms to gather a solid management platform which it will be able quickly respond to changing market circumstances. Toyota should also maintain a streamlined structure, reducing the reduction of fixed costs and enhance its business in established markets in developed countries. This is likely to augment is revenue generation.