You are evaluating the audit risk of Tep, Inc. Which one of the following do you

Question

You are evaluating the audit risk of Tep, Inc. Which one of the following do you think is
most likely to increase this risk? Why?

A. Tep, Inc. was started as a local family business and has received additional funding over the years from several investors.

B. A new CFO is redesigning Tep's accounting policies and procedures.

C. Tep consists of three core business operations: product sales in its retail store, product
sales to food and specialty stores, and food services.

D. Tep experienced significant sales growth during its history and continues to expand its
product offerings and market reach.

Explanation / Answer

B. A new CFO is redesigning Tep's accounting policies and procedures.

Policy

A policy is a statement that outlines the principles and views of the business on each topic covered. It is an overview of certain rules you should have in your business.

Your policies should contain following otherwise it will increase risk

Procedure

Sometimes a policy will need a supporting procedure. Procedures are clear and concise instructions on how to abide by the policy. They detail the sequence of activities that are required to complete tasks and should include the 'how to' guidelines to achieve the necessary results.

Procedures should contain following otherwise it will increase risk

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