Preview Questions External Auditor | Role Specific Skill

Question 1: When investigating potential irregularities in an asset's fair value, how should an external auditor approach the review?

Which action should you take?

Choose only one option

By examining the asset's liquidity position

By reviewing the pricing methodology and assumptions used

By comparing the asset's market price with similar assets

By analyzing the asset's performance over time

Question 2: What is the importance of a working paper in audit documentation?

Which action should you take?

Choose only one option

To provide a template for documentation

To summarize legal compliance

To substantiate the audit findings

To act as a reference for future audits

Question 3: In assessing fraud risk, which of the following procedures is most likely to identify fraudulent financial reporting in BFSI?

Which action should you take?

Choose only one option

Reviewing high-risk transactions and their corresponding documentation

Analyzing historical financial data trends

Sampling transactions randomly

Conducting interviews with senior management

Question 4: In performing a regulatory compliance audit for a bank, how would the auditor evaluate adherence to the Financial Action Task Force (FATF) recommendations?

Which action should you take?

Choose only one option

By assessing customer feedback on service quality

By focusing on the profitability of the bank's investment portfolio

By testing internal controls related to money laundering risk

By verifying the bank's credit rating and capital adequacy

Question 5: Which of the following is a key consideration when auditing loan loss provisions in a financial institution?

Which action should you take?

Choose only one option

Review the adequacy of loan impairment models and historical loss experience

Focus exclusively on the risk of financial misstatement due to errors

Check if provisions are based solely on management estimates

Compare the provisions to those reported by similar institutions in the market

Question 6: What should an external auditor do if discrepancies are found in the financial statements of a BFSI institution?

Which action should you take?

Choose only one option

Accept the discrepancies if they are immaterial

Ignore the discrepancies if they do not affect profitability

Raise the issue with management and perform additional audit procedures

Only report discrepancies without further testing