Pizza Inc., a pizza take-out and delivery chain, is experiencing decreasing revenues and is steadily losing market share despite favorable market testing of its products/recipes. The company’s strategy has traditionally been defined as gaining increased market share through customer satisfaction. Management has asked your internal audit function to help them understand the reasons for declining sales at the Uptown location and how the decline might be related to internal operations. Your prior internal audit experience and direct observation of work performed at the troubled location identified the following info: In 20XX, Pizza Inc.’s corporate office screened this site location prior to construction to ensure that neighborhood demographics supported the ideal business environment. This resulted in locating the chain near a suburb where typical residents were in the mid- to upper-middle class income range and who owned homes with three to four bedrooms. Despite the favorable location, the site you are reviewing continues to have gross and operating margins lower than their local competitors. On the Job training is the primary method used by managers to communicate company policy and procedures. However, documented policies and detailed procedures do exist for each key process and are available by request from the shift manager. Employees are typically male, 17 to 23 years old, with little or no prior work experience at the time of hire. Unscheduled absenteeism is high and part-time shift assignments are rotated frequently to reward those individuals who regularly work as scheduled. The internal audit team noted in last year’s review that management has documented an average annual turnover rate of 18 percent. The shift manager is responsible for ensuring that all pizza orders are completed within the advertised time dead lines, a long held competitive advantage. Drivers are required to record on a delivery ticket the time of their arrival at the delivery location. This time is compared with the time recorded on the order ticket to calculate total elapsed minutes. Review of the last six month’s delivery tickets indicates that the company benchmark delivery cycle time of 25 minutes from “placing the order to when we’re on the doorbell” has slipped to an average of 43.8 minutes. For months there have been persistent rumors about bets placed on one driver’s notorious reputation for beating the delivery deadline every time. Delivery promptness is also dependent on the volume of completed pizzas at any given time and the neighborhood traffic pattern. Drivers are initially screened at hire for outstanding traffic violations or other infractions. The original site manager posted a large map on the wall so drivers can identify their routes. Mileage is reimbursed as part of the compensation for using their own vehicles so each driver turns in a mileage log at the end of the shift to indicate both starting and ending mileage. The manager randomly check.

1. Pizza Inc., a pizza take-out and delivery chain, is experiencing decreasing revenues and is
steadily losing market share despite favorable market testing of its products/recipes. The
company’s strategy has traditionally been defined as gaining increased market share through
customer satisfaction. Management has asked your internal audit function to help them
understand the reasons for declining sales at the Uptown location and how the decline might be
related to internal operations. Your prior internal audit experience and direct observation of work
performed at the troubled location identified the following info:
In 20XX, Pizza Inc.’s corporate office screened this site location prior to construction to ensure
that neighborhood demographics supported the ideal business environment. This resulted in
locating the chain near a suburb where typical residents were in the mid- to upper-middle class
income range and who owned homes with three to four bedrooms. Despite the favorable
location, the site you are reviewing continues to have gross and operating margins lower than
their local competitors.
On the Job training is the primary method used by managers to communicate company policy
and procedures. However, documented policies and detailed procedures do exist for each key
process and are available by request from the shift manager. Employees are typically male, 17 to
23 years old, with little or no prior work experience at the time of hire. Unscheduled absenteeism
is high and part-time shift assignments are rotated frequently to reward those individuals who
regularly work as scheduled. The internal audit team noted in last year’s review that management
has documented an average annual turnover rate of 18 percent.
The shift manager is responsible for ensuring that all pizza orders are completed within the
advertised time dead lines, a long held competitive advantage. Drivers are required to record on a
delivery ticket the time of their arrival at the delivery location. This time is compared with the
time recorded on the order ticket to calculate total elapsed minutes. Review of the last six
month’s delivery tickets indicates that the company benchmark delivery cycle time of 25 minutes
from “placing the order to when we’re on the doorbell” has slipped to an average of 43.8
minutes. For months there have been persistent rumors about bets placed on one driver’s
notorious reputation for beating the delivery deadline every time.
Delivery promptness is also dependent on the volume of completed pizzas at any given time and
the neighborhood traffic pattern. Drivers are initially screened at hire for outstanding traffic
violations or other infractions. The original site manager posted a large map on the wall so
drivers can identify their routes. Mileage is reimbursed as part of the compensation for using
their own vehicles so each driver turns in a mileage log at the end of the shift to indicate both
starting and ending mileage. The manager randomly checks the recorded starting or ending
mileage against the cars’ odometers.

2. Pizza Inc.’s company policy requires that each location restrict itself to a five mile service area;
however, if an order comes in, the work is never refused. Phone orders occur in predictable
patterns, but walk-in orders are more random and less frequent. Scheduling staff requirements to
match the anticipated workload is done one week in advance. The average workload during peak
hours is 29 orders taken per hour. Orders are manually written on pre-numbered pads. When
mistakes are made, the original order ticket is tossed out and a new order form is created to avoid
confusion. Information captured includes: date, time of call, name, address, phone number, type
of crust, and toppings requested. Hand calculators are available to assist with pricing quotes that
are told to the customer and recorded on the delivery ticket. Shift managers check every order to
ensure that info is complete prior to processing the order.
Employees who make the pizza are instructed in the proper quantity of ingredients for various
standard topping combinations. Frequently, special request orders are received that add items to
the standard recipe. Measuring cups are available, but your internal audit team noted on prior
visits that when activity reaches peak load, employees generally “know” how much of key
ingredients to use. The manager monitors the supply cabinets and refrigerators at the end of the
shift to ensure adequate inventory is on hand. Several months ago, the evening shift manager
determined that inventory deliveries should be increase to four per week, up from the usual three.
Oven temperatures are monitored closely to ensure the pizzas are properly cooked. Employees
who bake the pizza rely on a centrally located wall clock to time the various combinations. There
are cooking guidelines posted for each standard topping combination with instructions on what
to do if a pizza is overcooked. Generally these are available to employees for snacking.
All employees are responsible for ensuring the baked pizzas are cut, boxed, had-labeled for
delivery, and assigned to the next available driver. (Drivers work in a FIFO method.)
Your internal audit team determined, after reviewing info received from various external sources
and reading Pizza Inc.’s internal communications on strategy, mission, and vision, that linking
the business risks to business processes will assist Pizza Inc.’s CEO, and chief operating officer
with identifying the critical business processes and key success factors for each process.
As leader of the internal audit team, you have agreed to:
1.Identify and list the key processes used by Pizza Inc. at their individual site locations.
2.Determine 10 business risks for the typical site location and assess the impact and likelihood of
these risks.
3.Link the business processes to the business risks. Determine which are key versus secondary
links.
4.Select a key process (on you consider critical to the success of an individual site location) and
create a detailed level process map of the activities.

3. 5.Identify the specific risks associated with the activities of the key process (that is, the process
you selected for process mapping).
6.Map the identified risks according to their inherent impact and likelihood of occurrence.
7.Based on the case facts provided above, identify controls (actions management currently takes)
to mitigate the identified risks and put them on the risk/control matrix.
8.Determine techniques for assessing the effectiveness of the existing controls.
9.Based on your observations and opinions of the potential effectiveness of the current risk
response activities to address risks in the critical process you selected, create recommendations
to mitigate the existing risks and improve performance.
Solution
Identify key process
1) operating process
2) management and support process
Operating processs:- is choosing a location , setting strategy, designing the product ant its pricing
, recieving order and quoting the price, cooking , delivering and invocing and money collecting.
Management and support process:- Manage human resaources and training the same, managing
informations and technology resources , managing physical resaources , compliance with lawas
and regulationsa and also managing customer relaionships.
Identifying business risks
There are strategic risks which involves competition , satisfaction of the customers and their
reputation
Complieance riskes - risks related to violatiosn of lawas and regulations adn ethics,
Operating risks:- cyclt time , performance ,incentives , process execution ,communication , pizza
pricing and default.
Identify impact & likelihood of business risks
High impact with low likelihood- Default , customer satisfaction , commodity pricing,
competition and cycle time
Moderate impact and likelihood- violation of law and ethics , communication , process execution
, data integrity
low impact and high likelihood- performance incentives
Key versus / secondary risks
risk factors
Processws

4. Detailed operating process
1) Start manually on an order whether online/phone or wal in ; calaculater price according to the
menu adding price of ingredients on th etop to basic pizza prize of pizza
2)staffes in the store recieve online order in the electronic system , make call to customer to
confirm order information and delivry information and write down on a prenmbered pads.
3)Different order are place in different process . if the order is standard follow the general
process , which is easy to control weight if each ingredient and enable mass production ,.Special
order required special management inclding cooking and weighing.
4)evaluate degree of over cooked pizza and determine what to do based on specific instruction
.mostly ovecooked pizza is for snacking.
5)packing process includes , checking the finished product matches with the order requirement
and attaching of a label of information pertaining to delivery
6)last of delivery process invloves syastematic management , time control and perofrmance
evalustion.
Risk matrix for process
-wrong order taken
-Online system bug
Bad attitude of employees
-materials wasted and cost increased
-Compalin from customer
Gives bad reputaiton
M
M
H
H
L
L
1- calaculation mistake
2Cashier forgets price chage
1) wrong price ., customer satisfaction decreased
2) Bad reputation
M
M
M
L
1- lost

5. 2-Order ignorned due to staff carelessness
1) wrong qty as cups not measured
2)Standard quality not met
1) wastage
2) reduced customer satisfaction
M
H
H
L
Risk map
Bas attitude of employes , non std qualtiy . wrong product and wrong address have moderate risk
= longer delivery time has high risk
- online sysrem bug , cahier forget the price change of menu, laost adn order ignored due to staff
carelesseness has low risk
-calculation mistake - moderate rsik
- Wrong quality - high risk
controls-
forecast workload based on phone orders in advacne
- use automatic ordering system
- supervisor for cooking
- training og driver and implemetnation of punishment and reward
- incentive system and proper communication channel to avoid annual turnover rate of
employees
risk factors
ProcesswscompetitionCustomer satisfactionviolationcycle timeprocess locationperformance
incentivecommunicationconsumer pricingdefalultdata integritychhose locationskssSet
strategykkDesign product / pricingskkRecieve order /quotessssskproducekkksdeliverkskscollect
moneyssmanageHR adn trainingskkkmange ITsmanage physical resorucesskmanage
compliancekssmaange customer relationshipsss