Auditing Internal Controls 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 Internal Controls flashcards as text
When assessing the control environment of a bank, which factor is considered MOST fundamental to the effectiveness of all other controls?
Answer: Tone at the top and management's ethical values
Tone at the top establishes the ethical culture and commitment to controls that directly influences the effectiveness of every other control component.
A bank auditor uses attribute sampling to test controls. The auditor finds 3 deviations in a sample of 60. What is the sample deviation rate?
Answer: 5%
The sample deviation rate is calculated as deviations divided by sample size: 3 ÷ 60 = 5%.
Which type of internal control is BEST suited to prevent a teller from disbursing cash without a corresponding transaction record?
Answer: Preventive control through system-enforced transaction logging
A system-enforced transaction log prevents cash disbursements from occurring without a corresponding recorded entry, stopping the error or fraud before it happens.
In auditing a bank's allowance for loan and lease losses (ALLL), which internal control is MOST important to verify?
Answer: Controls over the completeness and accuracy of loan loss estimates
Controls over the completeness and accuracy of ALLL estimates directly affect the reliability of a bank's most significant accounting estimate.
Which audit evidence is generally considered MOST reliable when testing internal controls?
Answer: Externally generated documents obtained directly by the auditor
External evidence obtained directly by the auditor (e.g., direct bank confirmations) is the most reliable because it bypasses management and reduces the risk of manipulation.
When auditing controls over the bank's trading book, the auditor should PRIMARILY focus on which risk?
Answer: Market risk from unauthorized or limit-exceeding trading positions
Unauthorized trading or positions that exceed approved limits represent the primary internal control risk in the trading book, capable of causing massive sudden losses.
Which regulatory guidance specifically addresses the audit committee's oversight responsibilities for internal controls at U.S. banks?
Answer: OCC Handbook on Corporate and Risk Governance
The OCC Handbook on Corporate and Risk Governance outlines expectations for board and audit committee oversight of internal controls at national banks.