Preview Questions External Auditor | Role Specific Skill

Question 1: How should an external auditor assess the compliance of a bank with anti-money laundering (AML) regulations?

Which action should you take?

Choose only one option

By ignoring AML regulations if no red flags are identified

By reviewing the bank's marketing materials for compliance

By reviewing the bank's transaction monitoring systems and reporting mechanisms

By focusing only on the income statement of the bank

Question 2: Which approach is best for evaluating the completeness of off-balance-sheet items in an audit of a financial institution?

Which action should you take?

Choose only one option

Only examine on-balance-sheet items and assume completeness

Examine only the balance sheet and disregard other statements

Ignore off-balance-sheet items if they are not material

Review contingent liabilities and off-balance-sheet arrangements

Question 3: What documentation should be provided in the external auditor's report regarding the audit of internal financial controls at a BFSI institution?

Which action should you take?

Choose only one option

A summary of the financial audit process

A detailed account of fraud risks identified during the audit

A comprehensive review of compliance with internal control procedures

Only a list of internal controls found to be inadequate

Question 4: When evaluating the risk of non-compliance with tax regulations in a BFSI audit, what should an external auditor focus on?

Which action should you take?

Choose only one option

The company's tax filings for discrepancies

The company's relationship with regulatory authorities

The company's tax compliance framework and historical audits

The company's revenue recognition methods

Question 5: How should an external auditor evaluate a bank's fair value measurements for financial assets and liabilities?

Which action should you take?

Choose only one option

By focusing only on the financial statements without verifying the methods used

By accepting the bank's disclosed fair values as accurate if they are not materially incorrect

By investigating the models and assumptions used to derive fair values, ensuring alignment with applicable accounting standards

By recalculating fair values using an alternate method without considering the bank's rationale

Question 6: How can auditors effectively assess operational risks in a BFSI institution?

Which action should you take?

Choose only one option

Analyzing transaction data

Evaluating internal controls

Interviewing senior management

Reviewing compliance reports