Auditing Risk Management Flashcards
7 cards from real CBA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Auditing Risk Management flashcards as text
A bank's Three Lines of Defense model assigns internal audit to which line?
Answer: Third line
Internal audit represents the third line of defense, providing independent assurance over the effectiveness of the first and second lines.
When evaluating a bank's operational risk event data collection process, an auditor should be most concerned if:
Answer: Business lines self-report loss events with no independent validation
Self-reporting without independent validation creates a significant integrity risk, as business lines may under-report or misclassify operational losses.
Which metric is most appropriate for measuring a bank's exposure to interest rate risk in the banking book (IRRBB)?
Answer: Net Interest Margin (NIM) sensitivity and Economic Value of Equity (EVE)
NIM sensitivity measures income impact while EVE measures the present value impact of rate changes, making them the primary IRRBB metrics.
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:
Answer: Test the RCSA process for completeness, challenge assumptions, and validate against loss event data
Consistently favorable RCSA results without changes may indicate assessment complacency; auditors should validate results against actual loss data and challenge the methodology.
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?
Answer: Federal Reserve
The Federal Reserve administers the Comprehensive Capital Analysis and Review (CCAR) process, requiring large BHCs to submit annual capital plans.
When auditing a bank's model risk management framework, which of the following represents a key validation requirement for a credit scoring model?
Answer: The model must be validated by a team independent of model development, including conceptual soundness review
SR 11-7 guidance requires model validation to be performed by staff independent of development, including conceptual soundness, outcome analysis, and ongoing monitoring.
A bank experiences a significant increase in its non-performing loan (NPL) ratio. From a risk management audit perspective, which control failure is most likely indicated?
Answer: Weaknesses in credit underwriting standards or early warning indicator systems
Rising NPL ratios typically signal breakdowns in credit underwriting quality or failures in early warning systems that should identify deteriorating credits before default.