Final answer:
Post-merger internal audits in manufacturing organizations focus on areas like the merging of duplicated core functions, production decisions, and compliance with safety standards, all of which are susceptible to risk and inefficiencies that can impact profitability and reputation.
Step-by-step explanation:
In a post-merger manufacturing organization, several activities are particularly susceptible to risk and are likely to be scrutinized during an internal audit. These activities often involve the integration of two previously separate systems for producing goods or providing services. One key area of focus for internal audits is the merger of core functions like accounting and sales that are duplicated in each company.
Mergers and acquisitions can lead to staffing reductions, where decisions must be made regarding which employees to retain and the merging of different corporate cultures. The internal audit also assesses the decisions surrounding production, which include:
- What product or products the firm should produce
- The chosen production processes
- Determining the adequate level of output
- Pricing strategies for the firm's products
- Employment and labor considerations
These areas are crucial because any discrepancies or inefficiencies can affect the company's market position, employee morale, and ultimately, its profitability and legal compliance. Especially concerning are manufacturing processes where cutting costs may jeopardize employee safety, which can result in significant financial and reputational damage as seen in past controversies like the Firestone/Ford tire issue.