FREE CBA Auditing Internal Controls Questions and Answers

Question 1

Which component of the COSO Internal Control-Integrated Framework is generally considered the foundation for all other components, encompassing the 'tone at the top' set by the board of directors and senior management?

Accepted Answer

Control Environment

Answer

Risk Assessment

Answer

Monitoring Activities

Answer

Control Activities

Question 2

A bank's loan origination system is configured to prevent a loan officer from processing a loan application that exceeds their authorized lending limit by automatically rejecting the submission. This system feature is an example of which type of internal control?

Accepted Answer

Preventive

Answer

Detective

Answer

Corrective

Answer

Directive

Question 3

When testing the effectiveness of a bank's internal control over the wire transfer approval process, which of the following audit procedures generally provides the most persuasive evidence?

Accepted Answer

Reperforming the approval control for a selected sample of wire transfers.

Answer

Inquiring with the wire room supervisor about the approval process.

Answer

Observing the wire transfer clerk perform their duties for one hour.

Answer

Inspecting documented evidence of supervisory approval for a sample of transfers.

Question 4

An internal auditor discovers that a bank's reconciliation process for a correspondent bank account, which has a material balance, was not performed for three consecutive months due to employee turnover. This failure means that a material misstatement of the financial statements would not be detected in a timely manner. How should this control failure be classified?

Accepted Answer

A material weakness.

Answer

A standard control deficiency.

Answer

An acceptable operational risk.

Answer

A significant deficiency.

Question 5

According to established auditing standards and corporate governance principles, who has the primary responsibility for establishing and maintaining an effective system of internal controls within a bank?

Accepted Answer

The bank's management

Answer

The internal audit department

Answer

The external auditors

Answer

The primary federal regulator

Question 6

An internal auditor is assessing the overall effectiveness of a bank's internal control framework. Despite a well-designed system with proper segregation of duties, which of the following represents an inherent limitation that could still allow a material fraud to occur?

Accepted Answer

Collusion between a loan officer and a credit analyst to approve a fraudulent loan.

Answer

Lack of regular training for employees on control procedures.

Answer

The absence of an independent audit committee.

Answer

Failure to perform timely reconciliations of suspense accounts.