CBA Risk Management Auditing 2

Question 1

When auditing a bank's credit concentration risk, which metric is most critical to evaluate?

Accepted Answer

Single borrower exposures as a percentage of Tier 1 capital

Answer

Single borrower concentration relative to Tier 1 capital is the primary regulatory metric for measuring credit concentration risk.

Question 2

A bank's ALCO has approved a duration gap of +2.5 years. As an auditor, what is your primary concern?

Accepted Answer

A positive duration gap exposes the bank to falling net interest income if rates rise

Answer

A positive duration gap means asset durations exceed liability durations, causing net interest income to decline when interest rates rise.

Question 3

Which of the following best describes residual risk in a bank's risk management framework?

Accepted Answer

The risk remaining after management controls and mitigants have been applied

Answer

Residual risk is the exposure that remains after inherent risk is reduced by the effectiveness of existing controls.

Question 4

An auditor reviewing operational risk finds that a bank has not updated its Business Continuity Plan (BCP) in three years. Which risk is most directly elevated?

Accepted Answer

Operational risk from untested recovery capabilities

Answer

An outdated and untested BCP leaves the bank vulnerable to operational disruptions it cannot recover from efficiently.

Question 5

Under Basel III, the Liquidity Coverage Ratio (LCR) requires banks to hold enough High-Quality Liquid Assets (HQLA) to cover what scenario?

Accepted Answer

A 30-day stress period of significant liquidity outflows

Answer

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

(CBA) Certified Bank Auditor Practice Test

(CBA) Certified Bank Auditor Practice Test

CBA Risk Management Auditing 2