CBA Auditing Internal Controls 3

Question 1

Under FDICIA Section 112, banks with assets above a specified threshold must obtain an external auditor's attestation on management's assessment of:

Accepted Answer

Internal controls over financial reporting

Answer

FDICIA Section 112 requires larger banks to have management assess internal controls over financial reporting and obtain external auditor attestation of that assessment.

Question 2

A 'material weakness' in internal controls is distinguished from a 'significant deficiency' primarily by:

Accepted Answer

The likelihood and magnitude of potential misstatement

Answer

A material weakness represents a reasonable possibility that a material misstatement will not be prevented or detected, whereas a significant deficiency is less severe.

Question 3

When auditing a bank's wire transfer controls, which risk is MOST relevant that auditors should test specific controls for?

Accepted Answer

Unauthorized or fraudulent outbound wire transfers

Answer

Unauthorized or fraudulent wire transfers represent the highest risk because they result in immediate, often irreversible loss of funds.

Question 4

In evaluating the design adequacy of a control, an auditor is assessing whether:

Accepted Answer

The control, if operating as intended, would effectively mitigate the risk

Answer

Design adequacy assesses whether a control is theoretically capable of preventing or detecting a misstatement or risk if it operates as intended.

Question 5

Which of the following BEST describes a 'walk-through' in the context of internal control auditing?

Accepted Answer

Tracing a transaction from initiation to recording while observing controls

Answer

A walk-through traces a single transaction through the entire process while the auditor observes controls being performed, confirming process understanding.

(CBA) Certified Bank Auditor Practice Test

(CBA) Certified Bank Auditor Practice Test

CBA Auditing Internal Controls 3