Preview Questions External Auditor | Role Specific Skill

Question 1: What is the first step an external auditor should take when performing a risk assessment for a BFSI institution?

Which action should you take?

Choose only one option

Assessing the company's internal control systems

Understanding the regulatory environment

Conducting interviews with senior management

Reviewing financial statements and disclosures

Question 2: How would an auditor assess a bank's compliance with the SEC regulations on transparency in financial reporting?

Which action should you take?

Choose only one option

By reviewing customer feedback and service ratings

By testing the accuracy and completeness of the bank's financial statements

By evaluating management's financial projections

By analyzing the bank's advertising and marketing materials

Question 3: Which of the following would constitute a violation of regulatory compliance for a financial institution regarding financial statements?

Which action should you take?

Choose only one option

The omission of significant transactions related to financial risk exposure

The inclusion of non-financial information on the balance sheet

The misreporting of customer deposits in the liability section

The inclusion of marketable securities on the income statement

Question 4: 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 5: 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 6: In the case of an underreported financial loss, how should an external auditor proceed with their investigation?

Which action should you take?

Choose only one option

By identifying the nature of the loss, investigating the internal reporting failures, and assessing its impact on the financial statements

Ignoring the loss if it does not impact profitability significantly

By documenting the loss and issuing a standard audit opinion without further analysis

By focusing only on the future impact of the loss without addressing historical misreporting