Preview Questions External Auditor | Role Specific Skill

Question 1: During a financial audit of a BFSI company, which of the following is the best way to evaluate the adequacy of reserves for loan loss provisions?

Which action should you take?

Choose only one option

Reviewing historical loss trends and comparing with current provisions

Comparing provisions to industry averages

Performing a sample review of individual loans

Relying solely on the bank's management estimates

Question 2: When assessing the risk of regulatory non-compliance during a BFSI audit, how should an external auditor prioritize areas for review?

Which action should you take?

Choose only one option

By focusing on new regulatory changes

By evaluating areas with the most significant financial impact

By reviewing high-risk transactions and operations

By assessing the adequacy of the bank's capital reserves

Question 3: Which statistical tool is most effective for fraud detection in large data sets?

Which action should you take?

Choose only one option

Regression analysis

Descriptive statistics

Mean and median analysis

Benford's Law

Question 4: How would you assess the adequacy of capital reserves during a risk assessment of a BFSI institution?

Which action should you take?

Choose only one option

By ignoring the regulatory requirements and focusing on profitability

By reviewing only management's capital adequacy reports

By reviewing capital adequacy ratios and stress testing scenarios

By examining historical reserves without any adjustments

Question 5: Which of the following would represent a high inherent risk when auditing a financial institution's balance sheet?

Which action should you take?

Choose only one option

A well-managed cash flow position

High concentrations of loans in volatile sectors such as real estate

Diverse geographic operations with minimal external factors

A stable portfolio of low-risk investments

Question 6: How can an auditor assess the reliability of a bank's risk management policies during an audit?

Which action should you take?

Choose only one option

Evaluate the effectiveness of internal controls and risk management frameworks

Test the operational efficiency of the risk management team without reviewing documents

Perform a risk assessment based on a subset of data and transactions only

Rely solely on interviews with senior executives regarding risk management