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

The board of directors is responsible for approving and owning the bank's risk appetite statement as part of its governance obligations.

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 monitoring and reporting is the component that ensures ongoing tracking and escalation of identified risks to appropriate management levels.

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

Frequent breaches of VaR confidence thresholds during back-testing suggest the model is underestimating actual risk, a significant model risk concern.

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

The LCR requires banks to hold enough HQLA to cover projected net cash outflows over a 30-day stressed liquidity scenario.

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

Ensuring delegated lending authority limits are documented, properly enforced, and subject to periodic review is the critical control in managing credit approval risk.

(CBA) Certified Bank Auditor Practice Test

(CBA) Certified Bank Auditor Practice Test

CBA Auditing Risk Management 2