Auditing Risk Management 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 Auditing Risk Management flashcards as text
A bank's risk appetite statement should primarily be approved and owned by which group?
Answer: Board of directors
The board of directors is responsible for approving and owning the bank's risk appetite statement as part of its governance obligations.
Which risk management framework component ensures that identified risks are continuously tracked and reported to management?
Answer: Risk monitoring and reporting
Risk monitoring and reporting is the component that ensures ongoing tracking and escalation of identified risks to appropriate management levels.
When auditing a bank's market risk framework, an auditor discovers that Value-at-Risk (VaR) back-testing results frequently exceed the confidence interval threshold. This indicates:
Answer: The VaR model may be understating actual risk exposure
Frequent breaches of VaR confidence thresholds during back-testing suggest the model is underestimating actual risk, a significant model risk concern.
Under Basel III, the Liquidity Coverage Ratio (LCR) requires banks to maintain sufficient high-quality liquid assets (HQLA) to cover net cash outflows for how many days?
Answer: 30 days
The LCR requires banks to hold enough HQLA to cover projected net cash outflows over a 30-day stressed liquidity scenario.
An auditor reviewing a bank's credit risk controls finds that loan officers have authority to approve credits up to their delegated limit without secondary review. The key control to verify is:
Answer: Delegated authority limits are documented, enforced, and periodically reviewed
Ensuring delegated lending authority limits are documented, properly enforced, and subject to periodic review is the critical control in managing credit approval risk.
Which of the following best describes 'concentration risk' in a banking context?
Answer: Excessive exposure to a single borrower, sector, or geography
Concentration risk arises when a bank has excessive exposure to a single counterparty, industry, or geographic region, creating vulnerability to correlated losses.
During an audit of a bank's stress testing program, the auditor should evaluate whether stress scenarios are:
Answer: Sufficiently severe, plausible, and cover multiple risk types simultaneously
Effective stress scenarios must be severe yet plausible and should capture interdependencies across multiple risk types to be meaningful for capital planning.