Preview Questions External Auditor | Role Specific Skill

Question 1: When auditing for compliance with the Bank Secrecy Act (BSA), which of the following is a key area of focus?

Which action should you take?

Choose only one option

Analyzing the bank's client satisfaction metrics

Reviewing the bank's profit margins and revenue generation

Assessing the implementation of customer due diligence procedures

Testing loan portfolio diversification strategies

Question 2: Which of the following is a key indicator that an external auditor should investigate further when assessing a BFSI company's liquidity?

Which action should you take?

Choose only one option

A significant increase in customer deposits

Large fluctuations in marketable securities

A sharp decrease in non-performing loans

A large increase in short-term borrowings

Question 3: How can an auditor assess the adequacy of a bank's credit risk management practices in relation to its loan portfolio?

Which action should you take?

Choose only one option

Test credit risk only for large loans while ignoring smaller ones

Review the processes used for loan approval, monitoring, and provisioning

Compare credit risk assessments to other banks without considering specific portfolios

Focus only on the loan default rates and ignore underlying risk management processes

Question 4: What is the most reliable method to evaluate the effectiveness of a bank's internal audit function during a financial audit?

Which action should you take?

Choose only one option

Ignore the internal audit function and focus on financial statement review

Rely solely on the internal audit's self-assessment without third-party review

Test internal audit procedures only in a limited scope without full evaluation

Perform an independent evaluation of internal audit reports and findings

Question 5: What approach should an external auditor take when evaluating the effectiveness of an institution's asset-liability management in a BFSI audit?

Which action should you take?

Choose only one option

Reviewing the interest rate sensitivity of the bank's assets and liabilities

Comparing the institution's capital adequacy ratio with regulatory requirements

All of the above

Assessing the liquidity ratios and stress testing results

Question 6: In assessing the accuracy of a bank's interest rate swap transactions during an audit, what key areas should be reviewed?

Which action should you take?

Choose only one option

Confirm contract terms, payment schedules, and valuations with counterparties

Focus only on the total value of swaps without testing individual transactions

Review only the pricing models used by management without external validation

Rely on management estimates of swap values without validating market conditions