CBA Financial Auditing and Reporting 3

Question 1

When auditing a bank's interest rate risk (IRR) disclosures, which document most directly addresses management's IRR measurement methodology?

Accepted Answer

The Asset/Liability Management (ALM) policy and committee minutes

Answer

The ALM policy documents the bank's IRR measurement models, risk limits, and governance, making it the primary source for auditing IRR methodology.

Question 2

A bank auditor is evaluating goodwill impairment testing under ASC 350. Which triggering event would require an interim impairment test between annual testing dates?

Accepted Answer

A significant regulatory action that negatively impacts the reporting unit's operations

Answer

A significant adverse regulatory action is a qualitative triggering event that makes it more likely than not that the fair value of a reporting unit has declined below its carrying amount.

Question 3

Which approach is required by U.S. GAAP under CECL (ASC 326) that differs most significantly from the prior incurred loss model?

Accepted Answer

Lifetime expected credit losses are estimated and recognized at the time of loan origination

Answer

CECL requires banks to estimate and record expected credit losses over the entire life of a financial instrument at origination, replacing the incurred loss trigger.

Question 4

An auditor is assessing the completeness assertion for off-balance-sheet exposures at a bank. Which procedure is most relevant?

Accepted Answer

Reviewing unfunded commitment records and comparing to loan origination documentation

Answer

Comparing unfunded commitment records to loan agreements ensures that all off-balance-sheet credit exposures are identified and properly disclosed.

Question 5

Under GAAS, when a bank auditor uses the work of an internal auditor, the external auditor must:

Accepted Answer

Evaluate the competence, objectivity, and work quality of the internal audit function

Answer

AU-C Section 610 requires external auditors to assess internal auditors' competence and objectivity and evaluate the quality of their work before placing reliance on it.

(CBA) Certified Bank Auditor Practice Test

(CBA) Certified Bank Auditor Practice Test

CBA Financial Auditing and Reporting 3