Appears to be in bypass in the photo. The white fitting in the upper right is a check valve. It will keep water from entering the water heater in that direction and only allows water to flow outward. Assuming the check valve is in good working order. Typically, the handle perpendicular to the pipe indicates closed and the handle parallel to the pipe indicate open. If your valve are like that then the WH is in bypass. Left valve should be open, bottom valve should be closed.
You don't need any modifications to your plumbing system. Some do not have the check valve and have another manually operated valve in its place. Remember folks, not all systems are alike from one brand to another.
Also, I see nothing wrong with the wiring. It appears to be Romex coming into an approved Romex clamp going into the box. The corrugated tubing is simply for chaff protection. It's not any kind of conduit system. At least from looking at the picture.
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