1. What is the primary objective of a risk-based internal audit in banks?
A. To increase the workload of auditors
B. To replace regulatory inspections completely
C. To focus audit efforts on high-risk areas
D. To reduce the bank's overall compliance requirements
Risk-based internal audits prioritize areas of higher risk to ensure efficient use of audit resources and strengthen the bank's risk management framework.
2. Which of the following is a key difference between traditional audits and risk-based audits?
A. Risk-based audits focus on high-risk areas rather than reviewing all areas equally
B. Traditional audits are only concerned with IT systems
C. Risk-based audits do not consider regulatory compliance
D. Traditional audits are only performed quarterly
Risk-based audits allocate audit resources based on the risk profile of various areas, while traditional audits review all processes uniformly.
3. What is one of the main roles of compliance inspections in banks?
A. Approving new loan products without risk assessment
B. Focusing only on financial audits
C. Reducing the number of internal staff in compliance
D. Ensuring adherence to regulatory guidelines and internal policies
Compliance inspections verify that the bank's operations comply with regulatory requirements and internal policies to mitigate legal and operational risks.
4. How does a risk-based internal audit benefit bank management?
A. By eliminating the need for external audits
B. By providing insights on high-risk areas for informed decision-making
C. By reducing capital requirements
D. By avoiding regulatory reporting obligations
Management receives detailed insights on high-risk areas, enabling proactive measures and better allocation of resources to mitigate risks.
5. Which factor is most critical in designing a risk-based audit plan?
A. Random selection of branches for audit
B. Reducing audit frequency to save costs
C. Assessing the risk profile of business units and processes
D. Following only historical audit schedules without modification
A risk-based audit plan prioritizes auditing areas based on their risk assessment to efficiently manage resources and focus on critical control points.
6. What is the primary purpose of a compliance reporting framework in banks?
A. To increase the workload of compliance officers
B. To provide structured, timely, and accurate information on regulatory adherence
C. To replace internal audit reports completely
D. To reduce board oversight of compliance
A compliance reporting framework ensures that management and the board receive accurate, timely, and structured reports on adherence to laws, regulations, and internal policies.
7. Which of the following is a key element of monitoring compliance effectively?
A. Ignoring minor breaches in low-risk areas
B. Focusing only on financial reporting
C. Performing audits without follow-up
D. Tracking compliance trends, incidents, and corrective actions regularly
Effective monitoring involves tracking regulatory breaches, identifying trends, and ensuring that corrective actions are implemented to prevent recurrence.
8. How does automation support monitoring compliance in banks?
A. By providing real-time alerts and dashboards on regulatory breaches
B. By eliminating the need for risk assessment
C. By reducing the number of compliance officers required to zero
D. By allowing banks to avoid reporting to regulators
Automation tools help banks monitor compliance in real-time, generate alerts, track incidents, and maintain dashboards for management oversight.
9. Which stakeholders are primarily responsible for reviewing compliance reports in banks?
A. Branch customers
B. External auditors only
C. Senior management and board committees
D. Only the RBI inspectors
Compliance reports are reviewed by senior management and board-level committees to ensure the bank is adhering to regulatory and internal policy requirements.
10. What is the role of key compliance indicators (KCIs) in monitoring?
A. They replace the need for internal audits
B. They provide measurable metrics to assess compliance effectiveness
C. They serve only as historical records without action
D. They focus solely on financial performance
Key Compliance Indicators (KCIs) are measurable metrics used to track and assess how effectively the bank is complying with regulations and internal policies.
11. What is the main objective of disclosure requirements in banks?
A. To hide sensitive financial information
B. To reduce regulatory oversight
C. To provide transparency to stakeholders and regulators
D. To avoid publishing annual reports
Disclosure requirements aim to ensure that banks provide accurate and complete information regarding financial position, risk exposures, and compliance to regulators, investors, and stakeholders.
12. Which of the following is typically covered under statutory disclosures by banks?
A. Capital adequacy, NPAs, provisioning, and exposure to related parties
B. Employee vacation schedules
C. Customer personal information
D. Marketing campaign strategies
Statutory disclosures in banks include details about capital adequacy, non-performing assets, provisioning, risk exposures, and related party transactions as per regulatory requirements.
13. Why is timely disclosure important for banks?
A. To reduce audit frequency
B. To avoid RBI inspections
C. To minimize compliance costs
D. To maintain market confidence and regulatory compliance
Timely disclosures help maintain transparency, uphold market confidence, and ensure that the bank complies with regulatory reporting requirements.
14. Which regulatory framework primarily governs disclosure requirements for banks in India?
A. Companies Act 1956
B. RBI Guidelines and Basel Norms
C. Securities and Exchange Board of India Act (SEBI)
D. GST Act
In India, disclosure requirements for banks are governed mainly by RBI guidelines, including Prudential Norms, and international standards such as Basel norms on risk and capital adequacy.
15. What is the consequence of non-compliance with disclosure requirements?
A. Regulatory penalties, reputational risk, and loss of stakeholder confidence
B. Automatic increase in bank profits
C. Reduction in audit obligations
D. No impact as long as internal policies are followed
Failure to comply with disclosure norms can lead to penalties from regulators, reputational damage, and a loss of confidence among investors, depositors, and stakeholders.
16. What is the primary purpose of accounting standards in banks?
A. To allow each bank to maintain its own unique reporting method
B. To ensure consistency, transparency, and comparability in financial reporting
C. To avoid regulatory oversight
D. To focus only on internal managerial reports
Accounting standards provide a framework for consistent and transparent financial reporting, enabling comparability across banks and adherence to regulatory requirements.
17. Which organization in India issues accounting standards applicable to banks?
A. Securities and Exchange Board of India (SEBI)
B. Ministry of Finance
C. Institute of Chartered Accountants of India (ICAI)
D. Reserve Bank of India (RBI)
The Institute of Chartered Accountants of India (ICAI) issues accounting standards (Ind AS/AS) that banks and other entities in India must follow to ensure accurate and comparable financial statements.
18. Which of the following is a critical accounting standard for banks regarding asset classification?
A. AS 1 – Disclosure of Accounting Policies
B. AS 5 – Net Profit or Loss for the Period
C. AS 12 – Accounting for Government Grants
D. AS 28 – Impairment of Assets
AS 28 (Impairment of Assets) is particularly relevant for banks to recognize the impairment of loans, advances, and investments and ensure proper provisioning.
19. How do accounting standards support compliance audit in banks?
A. By providing clear guidelines for recording and reporting transactions
B. By eliminating the need for regulatory reporting
C. By focusing only on non-financial compliance
D. By restricting audits to branch-level operations
Accounting standards help compliance auditors assess whether financial transactions are recorded and reported accurately and in line with regulatory and statutory requirements.
20. What is the consequence of non-compliance with accounting standards by banks?
A. Automatic approval of financial statements
B. Exemption from RBI inspections
C. Regulatory penalties, restatement of accounts, and loss of stakeholder trust
D. Increased profitability without audit
Non-compliance with accounting standards can lead to penalties from regulators, the need to restate accounts, and erosion of confidence among investors, depositors, and stakeholders.
21. What is the primary objective of SEBI Listing Regulations for banks and listed entities?
A. To restrict banks from publishing financial statements
B. To ensure transparency, timely disclosure, and investor protection
C. To allow selective disclosure of sensitive information
D. To reduce compliance obligations for listed entities
SEBI Listing Regulations require listed entities, including banks, to disclose accurate and timely information to maintain transparency, protect investors, and enhance corporate governance.
22. Which of the following disclosures are mandatory under SEBI Listing Regulations?
A. Employee personal records
B. Marketing strategies
C. Branch operational details
D. Financial results, material events, corporate governance reports
Mandatory disclosures under SEBI Listing Regulations include financial results, material events, related party transactions, and compliance with corporate governance norms.
23. What is the timeline for disclosure of financial results under SEBI Listing Regulations?
A. Within 90 days from the end of the quarter
B. Only at the end of the financial year
C. Within 45 days from the end of the quarter
D. Whenever convenient for the management
SEBI Listing Regulations require listed entities to publish quarterly financial results within 45 days from the end of each quarter to ensure timely information for investors.
24. Which committee’s reports are required to be disclosed under SEBI Listing Regulations?
A. Marketing Committee
B. Audit Committee and other board-level committees
C. Branch Operations Committee
D. Human Resource Committee only
SEBI Listing Regulations mandate the disclosure of reports from the Audit Committee, Nomination & Remuneration Committee, and other board-level committees to ensure transparency in governance.
25. What is the consequence of non-compliance with SEBI Listing Regulations disclosures?
A. Automatic approval of financial results
B. Reduced audit requirements
C. No impact as long as internal management is informed
D. Penalties, regulatory action, and reputational risk
Non-compliance with SEBI Listing Regulations can lead to penalties, regulatory actions, and damage to the bank’s reputation in the financial market.
