CBA Auditing Risk Management 3

Question 1

A bank's Three Lines of Defense model assigns internal audit to which line?

Accepted Answer

Third line

Answer

Internal audit represents the third line of defense, providing independent assurance over the effectiveness of the first and second lines.

Question 2

When evaluating a bank's operational risk event data collection process, an auditor should be most concerned if:

Accepted Answer

Business lines self-report loss events with no independent validation

Answer

Self-reporting without independent validation creates a significant integrity risk, as business lines may under-report or misclassify operational losses.

Question 3

Which metric is most appropriate for measuring a bank's exposure to interest rate risk in the banking book (IRRBB)?

Accepted Answer

Net Interest Margin (NIM) sensitivity and Economic Value of Equity (EVE)

Answer

NIM sensitivity measures income impact while EVE measures the present value impact of rate changes, making them the primary IRRBB metrics.

Question 4

An auditor notices that a bank's Risk and Control Self-Assessment (RCSA) scores have been consistently 'low risk' for three consecutive years with no significant changes. The most appropriate audit response is to:

Accepted Answer

Test the RCSA process for completeness, challenge assumptions, and validate against loss event data

Answer

Consistently favorable RCSA results without changes may indicate assessment complacency; auditors should validate results against actual loss data and challenge the methodology.

Question 5

Under the Dodd-Frank Act, bank holding companies with total consolidated assets of $50 billion or more are required to submit annual capital plans to which regulator?

Accepted Answer

Federal Reserve

Answer

The Federal Reserve administers the Comprehensive Capital Analysis and Review (CCAR) process, requiring large BHCs to submit annual capital plans.

(CBA) Certified Bank Auditor Practice Test

(CBA) Certified Bank Auditor Practice Test

CBA Auditing Risk Management 3