Question

2.1 There is a tool (way) to manage business risk. It has four parts. Explain each of them giving examples.

A.

a.

b.

c.

d.

2.2 Record the audit process in an appropriate manner

Lucy has also come to know of working papers. She is not too sure why they should be so important.

Required - Explain the following:

a. Two types of working papers.

b. 5 reasons auditors need working papers.

Answer 1

Ans. 2.1 There are four ways to manage business risk are aas follows.

1. Mitigate the risk :-

Mitigation involves outting contingency plans in place so that if the risky sitation does materialize you can implement your plan B. Take the e.g of an outside promotional event for your company, like a festival. The risk it might rain and that would effect attendance and the potential profit from the event possible ways to mitigate the risk rent a large tent to provide shelter from the rain.

2. Avoid the risk :

In drastic circumstances , if the risk consequences are too high, you could avoid them completely by cancelling or stopping the high risk business initiative . For ex- - If a new product launch could cripple your company financially you could pill the launch until the companies finances stabilize.