Preview Questions External Auditor | Role Specific Skill

Question 1: What is the external auditor's responsibility in assessing a BFSI institution's adherence to the National Financial Reporting Standards (NFRA)?

Which action should you take?

Choose only one option

Verifying the accuracy of the financial statements

Reviewing the institution's internal audit function

Ensuring proper documentation of financial transactions

Ensuring compliance with governance standards

Question 2: What is the best approach when an external auditor encounters inconsistent financial reporting across multiple subsidiaries?

Which action should you take?

Choose only one option

Highlighting the inconsistency only in the management letter

Ignoring the inconsistency if it doesn't affect the parent company

Reporting the inconsistency only if it affects tax filings

Documenting the inconsistency and assessing its material impact on consolidated financial statements

Question 3: Which data points are most relevant when analyzing non-performing assets (NPAs) in BFSI?

Which action should you take?

Choose only one option

Customer credit score

Loan origination amount

Industry of the borrower

Loan maturity date

Question 4: During a risk assessment of a financial institution, which area typically poses the highest risk of material misstatement?

Which action should you take?

Choose only one option

General expenses and overheads

Cash and cash equivalents accounts

Revenue recognition related to interest income and fees

Management's compensation structures

Question 5: When performing an audit of a BFSI institution, how does an external auditor assess compliance with the Dodd-Frank Act?

Which action should you take?

Choose only one option

By reviewing the bank's consumer protection policies and practices

By analyzing the bank's exposure to foreign markets

By evaluating the capital adequacy ratio of the bank

By assessing the institution's financial risk models

Question 6: When assessing credit risk in a BFSI institution, what is the most effective risk assessment technique?

Which action should you take?

Choose only one option

Testing loan samples for accuracy

Reviewing credit risk policies and the adequacy of loan loss provisions

Comparing the bank's lending practices with industry standards

Analyzing the company's debt-to-equity ratio