Preview Questions External Auditor | Role Specific Skill

Question 1: During a financial audit, how do you assess the risk of fraud in the recognition of financial assets?

Which action should you take?

Choose only one option

Test the accuracy of income statements without focusing on asset recognition

Analyze accounting policies and check for unusual patterns or discrepancies

Rely on interviews with senior management to assess potential fraud risks

Focus exclusively on the audit of liabilities rather than assets

Question 2: What would an external auditor most likely consider when evaluating the risk of errors in a bank's financial reporting systems?

Which action should you take?

Choose only one option

The design and effectiveness of the reporting system and the integrity of data inputs

The bank's compliance with external audit regulations

The volume of transactions processed by the reporting system

The frequency of system updates and the presence of backup systems

Question 3: What is the most effective approach to assessing the accuracy of loan loss provisions in an audit for a financial institution?

Which action should you take?

Choose only one option

Rely solely on management's calculations without further testing

Perform no testing and accept management's judgment on provisions

Review historical data and evaluate the adequacy of loan loss reserves based on credit risk models

Only examine the loan loss provisions at year-end

Question 4: What is the key characteristic of a red flag in forensic accounting?

Which action should you take?

Choose only one option

Consistent entries

Low materiality

Irregular documentation

High transaction volume

Question 5: Which method should be used to assess the effectiveness of internal controls during a financial audit in BFSI?

Which action should you take?

Choose only one option

Perform a walkthrough of key controls and test their operation

Perform analytical procedures only without control testing

Review the general ledger entries without performing any tests

Rely solely on management's representation of controls

Question 6: When performing a regulatory compliance audit for a financial institution, how should an external auditor assess the institution's adherence to cybersecurity regulations?

Which action should you take?

Choose only one option

By reviewing the bank's marketing strategies and digital media usage

By comparing the bank's cybersecurity investments with industry peers

By focusing on the bank's financial performance

By evaluating the security measures for protecting sensitive financial data