Practice Test Geeks(CBA) Certified Bank Auditor Practice Test
← All CBA Flashcard Decks

Financial Reporting & Analysis 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 Financial Reporting & Analysis flashcards as text

  1. Under the current expected credit loss (CECL) model, a bank segments its commercial loan portfolio into pools. Which factor is NOT a required consideration when determining pool segmentation?

    Answer: The CEO's approval of pool definitions

    CECL requires pools to share common risk characteristics and be supported by historical loss data and risk ratings — executive approval is a governance matter, not an ASC 326 segmentation criterion.

  2. A bank's earnings per share (EPS) increased by 15% while net income grew only 5%. Which action MOST likely explains the difference?

    Answer: A significant share buyback reducing shares outstanding

    EPS = Net Income / Shares Outstanding; a share repurchase reduces the denominator, causing EPS to grow faster than net income.

  3. Which financial reporting standard governs the recognition and measurement of a bank's trading securities?

    Answer: ASC 320 (Investments in Debt Securities)

    ASC 320 classifies debt securities into trading, AFS, and HTM categories, with trading securities measured at fair value through earnings.

  4. A bank uses a cash flow hedge to convert a variable-rate borrowing to fixed rate. The effective portion of the hedge gain/loss is recorded in:

    Answer: Other comprehensive income (AOCI) until the hedged item affects earnings

    Under ASC 815, the effective portion of a cash flow hedge is deferred in AOCI and reclassified into earnings when the hedged forecasted transaction (variable-rate interest payments) affects earnings.

  5. Which liquidity metric does Basel III's Liquidity Coverage Ratio (LCR) specifically measure?

    Answer: A bank's capacity to survive a 30-day stress scenario using high-quality liquid assets

    The LCR requires banks to hold sufficient HQLA to cover projected net cash outflows over a 30-day stress scenario, ensuring short-term liquidity resilience.

  6. When reviewing a bank's deferred tax assets (DTAs), an auditor is MOST concerned about which condition?

    Answer: DTAs exceeding the threshold requiring a valuation allowance due to insufficient future taxable income

    ASC 740 requires a valuation allowance when it is more likely than not that some or all of a DTA will not be realized — excessive DTAs relative to projected taxable income signal potential overstatement of this asset.

  7. In analyzing a bank's interest rate risk, a parallel upward shift of 200 basis points that causes a 15% decline in economic value of equity (EVE) indicates:

    Answer: The bank has significant long-duration assets funded by shorter-duration liabilities

    A large EVE decline from rising rates signals that the bank holds long-duration assets (e.g., fixed-rate mortgages) funded by shorter-duration liabilities, creating negative duration gap exposure.