CBA Auditing Risk Management 2

Question 1

A bank's risk appetite statement should primarily be approved and owned by which group?

Accepted Answer

Board of directors

Answer

Internal audit committee

Answer

Chief Risk Officer alone

Answer

External auditors

Question 2

Which risk management framework component ensures that identified risks are continuously tracked and reported to management?

Accepted Answer

Risk monitoring and reporting

Answer

Risk identification

Answer

Risk appetite setting

Answer

Risk transfer

Question 3

When auditing a bank's market risk framework, an auditor discovers that Value-at-Risk (VaR) back-testing results frequently exceed the confidence interval threshold. This indicates:

Accepted Answer

The VaR model may be understating actual risk exposure

Answer

The VaR model is overly conservative

Answer

Back-testing is being performed too frequently

Answer

Market conditions are unusually stable

Question 4

Under Basel III, the Liquidity Coverage Ratio (LCR) requires banks to maintain sufficient high-quality liquid assets (HQLA) to cover net cash outflows for how many days?

Accepted Answer

30 days

Answer

7 days

Answer

14 days

Answer

60 days

Question 5

An auditor reviewing a bank's credit risk controls finds that loan officers have authority to approve credits up to their delegated limit without secondary review. The key control to verify is:

Accepted Answer

Delegated authority limits are documented, enforced, and periodically reviewed

Answer

Loan pricing models are accurate

Answer

Collateral valuations are conducted internally

Answer

Credit analysts report directly to the CFO

Question 6

Which of the following best describes 'concentration risk' in a banking context?

Accepted Answer

Excessive exposure to a single borrower, sector, or geography

Answer

Risk arising from high employee turnover in the risk department

Answer

The risk that interest rates will change unexpectedly

Answer

Risk from foreign currency transactions

Question 7

During an audit of a bank's stress testing program, the auditor should evaluate whether stress scenarios are:

Accepted Answer

Sufficiently severe, plausible, and cover multiple risk types simultaneously

Answer

Limited to historical events only to ensure credibility

Answer

Developed exclusively by external consultants

Answer

Applied only to trading book exposures