CBA Auditing Risk Management Questions and Answers

Question 1

An auditor assesses a bank's inherent risk as high for its complex derivatives trading activities and its control risk as high due to a new, untested trading system.
To maintain an acceptably low level of overall audit risk, what is the most appropriate action for the auditor regarding detection risk?

Accepted Answer

Set the acceptable level of detection risk to a low level by performing more extensive audit procedures.

Answer

Increase the acceptable level of detection risk by reducing substantive testing.

Answer

Conclude that overall audit risk cannot be managed and issue a disclaimer of opinion.

Answer

Rely solely on management's representations as the primary source of audit evidence.

Question 2

During a review of a bank's risk management framework, an auditor notes that the board of directors has delegated oversight of risk management activities to an audit committee. Which of the following is a primary responsibility of the audit committee in this role?

Accepted Answer

Ensuring the independence and effectiveness of the internal and external audit functions.

Answer

Executing the day-to-day risk mitigation and control activities.

Answer

Designing and implementing the bank's internal control system.

Answer

Setting the bank's overall risk appetite and strategic objectives.

Question 3

A Certified Bank Auditor is evaluating the effectiveness of a bank's enterprise risk management (ERM) program based on the COSO framework. Which of the following activities best represents the 'Risk Assessment' component of the COSO framework?

Accepted Answer

Management uses a combination of qualitative and quantitative methods to analyze the potential likelihood and impact of identified risks.

Answer

The board of directors establishes a code of conduct and demonstrates a commitment to integrity and ethical values.

Answer

The internal audit function performs a follow-up review to ensure management has remediated a previously identified control weakness.

Answer

Segregation of duties is enforced within the loan origination and approval process.

Question 4

In the context of the 'Three Lines of Defense' model for risk management in a bank, which function serves as the third line?

Accepted Answer

The internal audit function.

Answer

Business unit management and process owners.

Answer

The independent risk management and compliance functions.

Answer

The board of directors and its committees.

Question 5

A bank has recently launched a new mobile banking application with peer-to-peer payment capabilities. When auditing the risk management process for this new product, which of the following would be the auditor's primary concern regarding operational risk?

Accepted Answer

The risk of loss resulting from inadequate or failed internal processes, people, and systems.

Answer

The potential for losses due to fluctuations in interest rates.

Answer

The possibility that the new service violates consumer lending regulations.

Answer

The likelihood that the bank's strategic goals for the new product will not be met.

Question 6

Which of the following describes the relationship between risk appetite and an internal audit plan for a bank?

Accepted Answer

The audit plan is designed to provide assurance that risks are managed within the bank's established risk appetite.

Answer

The audit plan dictates the bank's risk appetite.

Answer

Risk appetite is irrelevant to the development of the audit plan.

Answer

The audit plan and risk appetite are developed independently by the internal audit function.