IIA-CFSA.

284q

Number: IIA-CFSA
Passing Score: 800
Time Limit: 120 min

https://www.gratisexam.com/

IIA-CFSA

Certified Financial Services Auditor

Sections
1. Volume A
2. Volume B
3. Volume C

https://www.gratisexam.com/
Exam A

QUESTION 1
Which of the following situation would not impair audit objectivity?

A. An auditor is assigned to audit a business function that the auditor was responsible for nine months ago
B. An individual temporarily assigned to the internal audit activity because of the individual’s expert knowledge in a particular business function assigned to audit an
activity that the individual was responsible for just prior to transferring to the internal audit activity
C. An auditor is assigned to perform a post-implementation review on a system for which the auditor participated in the design process
D. An auditor is assigned to perform a post-implementation review on a system for which the auditor performed a procedure review and made control
recommendations prior to the system’s implementation

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 2
Internal auditing:

https://www.gratisexam.com/

A. Is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations
B. Is an independent, performance measurement and consulting activity designed to add Value and improve an organization’s operations
C. Helps an organization accomplish objectives by bringing a systematic, disciplined Approach to evaluate but rarely improve the effectiveness of risk
management, control and governance
D. Helps an organization accomplish objectives by bringing a targeted, disciplined approach to evaluate but rarely improve the effectiveness of risk management,
control and governance

Correct Answer: A
Section: Volume A
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 3
IIA’s code of ethics applies to __________ that provide internal auditing services:

A. Individuals
B. Entities
C. Individuals and entities
D. Individuals, entities and indirect authorities

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 4
Internal auditors are expected to uphold the following principles:

A. Integrity, objectivity, competency

B. Integrity, objectivity, confidentiality, and competency
C. Integrity, objectivity, awareness and competency
D. Integrity, objectivity, entirety

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 5
“Internal auditors make a balanced assessment of all the relevant circumstances and are not unduly influenced by their own interests or by others in forming
judgments.” This statement best explains one of the following principles:

A. Competency
B. Confidentiality

https://www.gratisexam.com/
C. Objectivity
D. Integrity

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 6
Internal auditors, engaging in activities that are illegal and discreditable to the profession of internal auditing or the organization, violate which of the following
principles:

A. Objectivity
B. Awareness
C. Integrity
D. Competence

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 7
Which of the following statements is NOT related to competency principle of internal auditing? Internal auditors:

A. Shall continually improve their proficiency and effectiveness and quality of their services
B. Shall perform internal auditing services in accordance with the standards for the professional practice of internal auditing
C. Shall engage only in those services for which they have the necessary knowledge, skills and experience
D. Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 8
While performing consulting services internal auditors should specifically maintain:

A. Proficiency level
B. Objectivity
C. Competence
D. Confidentiality

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 9
All these statements elaborate purpose of standards EXCEPT:

A. Foster improved organizational processes and operations

B. Establish the basis for the evaluation of internal audit performance
C. Subvert the framework for performing and promoting broad range of value-added internal audit activities.
D. Delineate basic principles that represent the practice of internal auditing as it should be

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 10
Nature of internal audit activities and quality criteria against which the performance of these services can be evaluated is best portrayed by:

A. Performance Standards
B. Attribute Standards
C. Implementation Standards
D. Evaluation Standards

https://www.gratisexam.com/
Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 11
There are multiple sets of attribute and performance standards:

https://www.gratisexam.com/

A. False
B. True
C. True- In specific conditions
D. False- In specific conditions

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 12
All of the following phrases are used to express the auditor’s opinion EXCEPT:

A. Give a true and fair view

B. Present fairly, in all material respects
C. Timely and consistent opinion
D. Comprehensible and realistic view

Correct Answer: C
Section: Volume A

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 13
The auditor should plan an audit with an attitude of:

A. Professional competence
B. Professional skepticism
C. Subject awareness
D. Opinion sharing

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 14
Which of the following is a limitation in an audit that affects auditors’ ability to detect material misstatements?

A. Scope of an audit
B. The use of testing
C. Over- generalization
D. Unidentifiable risks

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 15
Reasonable assurance relates to the:

A. Audit planning process

https://www.gratisexam.com/
B. Scope of the internal audit
C. End of the audit process
D. Whole audit process

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 16
The responsibility for preparing and presenting the audited financial statements is that of:

A. Internal auditor
B. Engagement client/ Management of the entity
C. Process owner
D. Auditing Agency

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 17
All these are disparities in public and private sector audits EXCEPT:

A. Objective and scope

B. Specific requirements of relevant regulation, ordinances or ministerial directives
C. Specific and broad range mandate in public sector
D. Reasonable assurance

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 18
Which one of the following is an internal control component?

A. Compliance control
B. Control activities
C. Financial Reporting Controls
D. Communication channels and network

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 19
Management must ___________ assess business risk and develop clearly defined control objectives:

A. Continually
B. Annually
C. Periodically
D. Weekly

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 20
Internal audit routinely reviews compliance risk and also should be reviewing business risk. The efforts to control both risk types will purely enhance:

A. The short-term profitability and viability of an organization

B. The long-term profitability and viability of an organization
C. Both short-term and long-term profitability and viability of an organization
D. None of these

https://www.gratisexam.com/
Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 21
Following statements define risk EXCEPT:

A. Organization has knowledge of facts constituting a dangerous condition

B. Organization voluntarily exposes itself to the danger
C. The element of assurance in an undertaking
D. Measured in terms of impact and likelihood

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 22
Strategic planning is the process of taking a long-term view of the organization, the longer the view, the greater the uncertainty of risks and opportunities. Such
reservations can better be handled by:

A. Timely decisions
B. Flexible/ Adaptive plans and processes
C. Periodic risk assessments
D. Focusing on current period organizational activity

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 23
High-risk scores are those with an average of scores:

A. 3.75 or more
B. 3.25 or more
C. 4.25 or more
D. 4.00 or more

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 24
Low-risk scores are those with an average of scores:

https://www.gratisexam.com/

A. 2.25 or less
B. 2.75 or less
C. 2.00 or less
D. 3.25 or less

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 25
Risks inherent in the management process are known as:

https://www.gratisexam.com/
A. Residual risks
B. Long-term risks
C. Control risks
D. Strategic risks

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 26
Both residual and control risk need to be_______________ dealt with in project management.

A. Timely
B. Implicitly
C. Professionally
D. Explicitly

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 27
“Ongoing monitoring activities are conducted to periodically reassess risk and the effectiveness of control risk,” is an objective of:

A. Risk Identification
B. Risk Measurement
C. Risk Management Process
D. Risk Prioritization

Correct Answer: C
Section: Volume A
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 28
Faulty human judgments, misunderstanding of instructions, errors, management override, and collusion and cost/benefit considerations are the limitations of:

A. Reasonable Assurance
B. Internal Control System
C. Risk Management
D. Compliance Control

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 29
Five internal control components are:

A. Control environment, Risk assessment, Control activities, Information and communication & Monitoring
B. Control environment, Risk assessment, and Operational control, Information and communication & Monitoring
C. Control environment, Risk Prioritization, Control activities, Information and communication & Monitoring
D. Control environment, Risk Prioritization, Control activities, Information and communication & Monitoring

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 30
Enterprise risk management encompasses all EXCEPT:

A. Aligning risk appetite and strategy

B. Enhancing risk responsibilities and decisions

https://www.gratisexam.com/
C. Increasing Operational Surprises
D. Seizing Opportunities

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 31
Organization’s Objectives are described in three general categories:

A. Effectiveness of operations, Efficiency of strategic plans, Reliability of internal and external reporting
B. Effectiveness of operations, Efficiency of strategic plans, Reliability of internal and external reporting, compliance with applicable laws and regulations
C. Effectiveness and Efficiency of operations, Compliance with applicable laws and regulations, Monitoring and management control system
D. Effectiveness and Efficiency of operations, Reliability of internal and external reporting, Compliance with applicable laws and regulations

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 32
The plans developed for the audit functions should be updated as circumstances dictate. Such specific types of plans include all EXCEPT:

A. Activity Reports
B. Target dates
C. Opportunities and threats
D. Staffing plans and financial budgets

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 33
Which one of the following statements is NOT the part of audit work schedule?

A. The extent and type of findings in the last audit

B. Loss of assets, errors and fraud
C. The availability of audit staff resources
D. Opportunities to achieve operations benefits

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 34
Risk is the probability that an event or action may adversely affect the organization or activity under review. In other words, risk is anything that can prevent an
organization from achieving an objective. Major components of risk are as follows EXCEPT:

A. Non- Compliance with the laws, rules and regulations

B. An event or cause that can interfere with achieving the objective (e.g. What can go wrong?)
C. A probability or likelihood of occurrence
D. The negative consequences of not achieving the objective

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 35
The extent to which an organization has implemented controls to minimize the actual occurrences of the risk determines the vulnerability to the risk actually
occurring, or the
“_______”

A. Inherent Risk
B. Understanding Risk

https://www.gratisexam.com/
C. Control Risk
D. Disguised Risk

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 36
The major benefit of risk assessment is:

A. To staff the plans and financial budgets

B. To consider factor that may affect risk and giving the highest priority to audit areas that have the highest potential for adverse consequences
C. To identify the possible adverse effects based solely on the type of activity, the type of resources, amount of assets or complexity of transactions
D. Failure to achieve the organization’s goal and objectives

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 37
The risk analysis process involves all of the following steps EXCEPT:

A. Identifying auditable activities (e.g. programs, accounts, contracts, transactions)

B. Identifying relevant risk factors (e.g. Complexity of programs, size of program, adequacy of internal control system)
C. Prioritizing Risks
D. Determine the need for external assistance of outsourcing

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 38
Which of the following steps is/are NOT considered in the audit planning process?

A. Identifying what is to be audited?

B. Assess risk and vulnerability
C. Determine how to manage the risks
D. Develop specific issues and Questions for the audit

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 39
Following is a list of background items auditors should review to determine their impact on audit objectives EXCEPT:

A. The history of the program or entire organization

B. Results of prior audits and their working papers
C. Applicable laws, rules and regulations. Specific items usually set forth in laws and regulations include the following: What the program is supposed to do? Who
is supposed to do it?
How much can be spent on what?
D. Audit methods, strategies, tests, analysis and comparisons

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 40
Auditors can use background information to define and modify:

A. Scope of the audit

B. The likelihood that a risk will occur
C. Activity reports

https://www.gratisexam.com/
D. Audit Criteria (Reasonable, attainable, and relevant)

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 41
The main purposes of the audit survey are to assist with following goals and tasks EXCEPT:

A. Develop preliminary estimates of time and resource requirements

B. Determine whether further auditing is necessary
C. Documenting key control activities
D. Identify potential critical control points, control deficiencies or excessive controls

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 42
Auditors define audit objectives based on information gained:

A. From external sources of the organization

B. Either from knowledge they already have or from inquiries and observations
C. From internal sources of the organization
D. From external sources of the organization

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 43
Which of the following is NOT included in the list of principles for formulating well- stated audit objectives?

A. Clearly identify the client

B. Clearly identify the type of performance to be audited and separate objectives if more than one element of performance is to be reviewed
C. Frame objectives that consider a realistic scope and methodology
D. Onsite Observation

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 44
Carefully crafted audit objectives are important BECAUSE:

A. Objectives provide direction

B. Limit collection of unneeded information
C. Control scope, methodology, timing and nature of audit work
D. All of the above

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 45
The scope of an audit defines the boundaries of the audit by addressing such items as the audit period or number of locations to be reviewed.. Some important
considerations when defining the scope of an audit include:

A. Needs of potential users of the audit report

B. Preliminary judgment about materiality levels
C. Both A and B
D. None of the above

https://www.gratisexam.com/
Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 46
Following elements should be documented in the audit scope EXCEPT:

https://www.gratisexam.com/

A. Time period to be covered by audit tests

B. Available data:
No. of records
Locations
Need to create data
Form
Reliability
C. Prioritizing risks
D. Both A and B

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 47
Site Selection Rationale
Client officials client/requesters for audit results
Scope limitations encountered or anticipated
Expert advice

The above elements should be documented in the:

https://www.gratisexam.com/
A. Audit planning
B. Risk assessment
C. Audit scope
D. None of these

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 48
Considerations for determining required audit resources include:

A. Training needed by the audit staff to meet the audit objectives

B. Contractual assistance needed to meet the audit objectives
C. Both A and B
D. None of these

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 49
Engagement client management often has a negative perception of audit process; therefore, communication throughout the audit process is essential to alleviate
some of the concerns of management. The very first step in communicating the audit information with the client is:

A. Entrance conference
B. Formal notification of the audit
C. Explanation of the scope of audit
D. None of these

Correct Answer: B

https://www.gratisexam.com/
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 50
Entrance Conference— The entrance conference may be the auditor’s first face-to-face contact with client. The objective/s of the entrance conference is/are to:

A. Explain preliminary audit scope

B. Present projected audit milestone dates and completion dates
C. Identify key contacts and desired communication protocols
D. All of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 51
“Audit management must decide whether to sample (judgment or statistical) or use the entire universe, and which specific quantitative and qualitative
methodologies will provide sufficient, competent and relevant evidence to answer the questions posed in the audit objectives.” It is an example of:

A. Determining appropriate audit methods and strategies

B. Determining resources needed to conduct the audit
C. Determining audit scope
D. None of these

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 52
Auditors must use professional judgment to determine the impact a risk factor may have on the use off audit resources. Risk can be controlled by various

https://www.gratisexam.com/
preventive measures such as:

A. Adding personnel to a function

B. Installing burglar alarms
C. Increasing the frequency and level of management review implement tighter standards
D. All of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 53
An organization might decide that the risk of fire is high so it will pay a high premium on its fire insurance policy to transfer the risk as much as possible. However,
the organization will still have to pay deductible amount on the policy if a fire occurs. This scenario depicts:

A. Assessment of the likelihood that a given risk will occur

B. Control the risk
C. Accept the risk
D. Transfer the risk

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 54
Which of the following is not a characteristic of a control environment?

A. Management communicates the importance of internal controls to all employees

B. Employees have a vague idea of their responsibilities; so they work in a flexible environment
C. Employees are held accountable for their performance
D. A system is in place to monitor controls on a regular basis

Correct Answer: B

https://www.gratisexam.com/
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 55
Factor/s that influences/influence the state of an organization’s control environment is/are:

A. Organizational history of control weakness or violations

B. Whether management emphasizes and values competence, integrity, and ethical behavior
C. An inconsistent or unfair employee performance evaluation, compensation and promotion system.
D. All of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 56
___________ help bring performance back into compliance, or address problems that have been identified such as employee grievance system, employee
performance approvals, or an administrative appeal’s process.

A. Correction controls
B. Detective controls
C. Preventive controls
D. None of These

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 57
Internal auditing controls (e.g. segregation of duties, monitoring, reconciliation), management controls (e.g. the plan, methods and procedures adopted by

https://www.gratisexam.com/
management to ensure its goals are met, including systems for measuring reporting and monitoring program performance), physical controls (e.g. security), and
Information technology control (e.g. access security controls ,data center operation controls). All these are examples of:

A. Detective controls
B. Control activities
C. Corrective controls
D. Preventive controls

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 58
Example/s of ongoing monitoring function/s is/are:

A. Management’s review of performance reports and comparing them to the budgets and other benchmarks
B. Feedback obtained from external parties (e.g. complaints from stake holders)
C. Direct supervision and review of work by functional level managers
D. All of above

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 59
___________ result from a failure to follow the logic of a series of statements.

A. Deductive fallacies
B. Inductive fallacies
C. Corrective controls
D. None of These

Correct Answer: A

https://www.gratisexam.com/
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 60
An example of an invalid deductive argument is as follows: Major premises: All employees who are committing fraud drive luxury cars. Minor premises: __________
Conclusion: Therefore, John Doe is committing fraud. What will be the minor premise in this example?

A. John Doe is an employee

B. John Doe drives a luxury car
C. John Doe is a senior management level employee
D. John Doe drives an ordinary car

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 61
A client makes the following statement: “If you make us put property tags and numbers on major equipment, next we will have to put tags on every pen, pencil, and
paper clip in the place.” This is the argument that if a particular action is taken, it will inevitably lead to another, less desirable action. We may call this:

A. Slippery slope
B. Hasty generalization
C. False use of authority
D. Ad Hominem

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 62

https://www.gratisexam.com/
After implementation of a drop out recovery program, employment rate rose. The drop out recovery program is responsible for increases in employment and look
for possible economic or other factors that might have contributed to the rise. This example may be referred towards:

A. Post Hoc, Ergo Propter Hoc

B. Ad Hominem
C. Non Sequiter
D. False use of authority

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 63
For Example one exception in 1000 cases is probably not the reason enough to recommend overhauling the entire system, although the final answer must be
derived from the context and the condition of the related control system. Which one of the following statements is clearly supported by this example?

https://www.gratisexam.com/

A. Auditors should base findings and recommendations on significant information

B. Auditors should be aware of that the concept of materiality and significance take on different meanings in the public and private sectors
C. Both of these
D. None of these

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 64
A manager of a very controversial program may have stolen only $200, but the controversy and public accountability aspects may make the 200 significant, where it

https://www.gratisexam.com/
would not be material private sector financial statement opinion audit. It means:

A. Auditors should be aware that the concepts of materiality and significance take on different meanings in the public and private sector
B. During the planning and reporting processes, government auditors may need to consider qualitative factors such as the visibility of the program under audit, or
the newness of the program or changes in its condition
C. Both of these
D. None of these

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 65
Audit evidence:

A. Is sufficient when it is factual and would convince an informed person to reach the same conclusion
B. Is competent if it consistently produces the same outcomes
C. Is relevant when it is directly related to audit comments, recommendations and conclusions
D. All of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 66
Data gathering and evaluation during field work includes:

A. Gaining and understanding of the activity, system, or process under review

B. Observing conditions and operations
C. Interviewing people and examining assets and accounting, and other operational business, and other operational records.
D. All of these

Correct Answer: D

https://www.gratisexam.com/
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 67
Compliance testing is designed primarily to:

A. Hold detection risk to an acceptable level

B. Determine whether policies and procedures have been followed
C. Determine that account balances exit, are accurate, and are properly classified
D. Provide evidence about monetary misstatements

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 68
Which one of the following is NOT an indicator of control weakness in derivatives?

A. Application of inappropriate valuation models

B. Management not involved
C. Evidence of a “Star Manager” syndrome
D. Absence of fiduciary mentality

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 69
Major categories of loans include all of the following EXCEPT:

https://www.gratisexam.com/
A. Commercial loans
B. Residential loans
C. Consumer loans
D. Agricultural loans

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 70
__________ allows businesses that sell durable goods such as auto-mobiles to finance inventories. As the business sells goods, the loan advance against those
goods is repaid.

A. Term loans
B. Consumer loans
C. Installment loans
D. Floor-plan financing

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 71
Common type/s of installment loans is/are:

A. Credit card loans

B. Residential loans
C. Mortgage loans
D. All of these

Correct Answer: C
Section: Volume A

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 72
Types of commercial loans are /are:

A. Installment loans
B. Floor plan financing
C. Asset-based financing
D. Both B and C

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 73
Management of the lending institution sets a reserve for loan losses at a given point based on such factors as mentioned below EXCEPT:

A. Number and type of loans made

B. Quality of loans made
C. Historical loss experience
D. Loan portfolio

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 74
If more funds than expected are needed to cover loans losses in a given period, the reserve must be increased and the difference is charged to:

A. Administration expenses

https://www.gratisexam.com/
B. Prepaid assets
C. Operating expenses
D. Loan expenses

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 75
When a loan becomes delinquent or when collection seems unlikely, banks often suspend:

A. Accrual of interest
B. Deferral of interest
C. Loan losses
D. Loan prepayments

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 76
If principal is paid on a loan after it has been placed on non-accrual status, the bank must determine whether it should record the payment as a reduction of:

A. The loan principal amount

B. Income interest
C. Both of these
D. Any one of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 77
Financial institutions regularly identify uncollectible accounts and charge them off against the reserve of:

A. Unearned loan revenue

B. Loan losses
C. Loan expenses
D. All of these

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 78
Watch lists of loans that are in danger of becoming delinquent generally contain information on such as:

A. Customers name and account information

B. Loan balance outstanding
C. Available collateral and its estimated value
D. All of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 79
Deposit accounts are:

A. Interest bearing accounts

B. Non-interest bearing accounts
C. Tax bearing accounts
D. Either A or B

https://www.gratisexam.com/
Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 80
Some small businesses keep funds in a savings account to gain interest on:

A. Fixed assets
B. Liquid assets
C. Loans
D. All of these

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 81
Which one of the following generally pays higher rates of interest than saving accounts?

A. Money market deposit accounts

B. Certificates of deposit
C. Term loans
D. Asset-based financing

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 82

https://www.gratisexam.com/
Interest rates offered on new CDs changes:

A. Daily at most banks

B. Twice a day at most banks
C. Weekly at most banks
D. Monthly at most banks

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 83
Certificates of deposit may be:

A. Bearable or registered
B. Negotiable or non-negotiable
C. None of these
D. Both of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 84
Many businesses generally find CDs to be a:

A. Satisfactory money management approach

B. More than satisfactory money management approach
C. Less than satisfactory money management approach
D. Dissatisfactory money management approach

Correct Answer: C

https://www.gratisexam.com/
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 85
Non-interest bearing accounts including checking accounts and escrow accounts are known as:

https://www.gratisexam.com/

A. Term deposit accounts

B. Demand deposit accounts
C. Fixed deposit accounts
D. Both A and C

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 86
Demand deposit account allows customers to transfer money through the use of:

A. Checks
B. ATMs and EFTs
C. Point of sale (POS) terminals
D. All of these

Correct Answer: D
Section: Volume A
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 87
During the posting process of ledger records on deposit account banks may reject some transactions because:

A. They lack proper endorsements

B. They are subject to stop payments
C. They would create an over draft
D. All of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 88
Which one of the following audit objectives and steps should not be considered when performing an audit of deposit account?

A. Determine whether dormant accounts are closed in a timely manner and in accordance with policies
B. Determine whether there are adequate controls to prevent unauthorized access and change to customer accounts
C. Determine whether applicable fees and penalties are properly assessed and posted
D. None of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 89
Trust departments provide services to publicly held companies related to issuing and maintaining:

A. Stock transactions
B. Stock balances
C. Stock threshold

https://www.gratisexam.com/
D. None off these

Correct Answer: A
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 90
Funds held in trust cannot be reinvented in:

A. Term deposits
B. Savings accounts
C. Financial institution’s own securities
D. Floor-plan financing

Correct Answer: C
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 91
Banks provide the following personal trust service/services for the individuals:

A. Estate settlement
B. Co-fiduciary
C. Agent
D. All of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 92
Some wills specify that more than one responsible party share the trustee’s responsibilities of an estate .The condition depicts relation with which one of the
following trust services:

A. Guardians of estates
B. Co-fiduciary
C. Estate settlement
D. Trusts

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 93
Corporations, government entities and other organizations use banks as trustee to handle the ______________function associated with a stock or bond issue.

A. Issuance and redemption of stocks or bonds

B. Transfer and record keeping of stock or bonds
C. None of these
D. Both of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 94
A trust agreement is called:

A. Trust paper
B. Trust agreement document
C. Both of these
D. None of these

https://www.gratisexam.com/
Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 95
Stock transfer agent, Bond registrar, stock registrar and dividend reinvestments agent are the additional duties of:

A. Brokers/Brokerage houses
B. Corporate trust departments
C. Mutual funds agencies
D. None of these

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 96
A bank may serve as ___________ for a company’s employee benefit and retirement plans.

A. Administrator or agent
B. Trustee or co-trustee
C. Custodian or depository
D. All of these

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 97
Which one of the following is/are NOT the type of retirement plans that banks may administer?

https://www.gratisexam.com/
A. Pension plans
B. Self-employed retirements trust
C. Group retirement accounts
D. Post-requirement accounts

Correct Answer: CD
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 98
Bank may serve as trustee or custodian for pension and profit sharing plans that self- employed individuals establish for them selves and their employees. These
types of trust are referred to as:

A. Defined benefit plans

B. Keogh plans
C. Individual retirement account
D. None of these

Correct Answer: B
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 99
Which one of the following activities is not related to the trust committee activities that should be reviewed?

A. Whether regular meetings are held and documented by meeting minutes

B. Whether the trust committee contains at least one member who is not a bank officer
C. Whether there is adequate oversight of the trust committee’s activities by board of directors
D. None of these

Correct Answer: D

https://www.gratisexam.com/
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 100
When the maturity date of the annuity arrives, the insurer begins making a series of payment to the annuitant over a stated period (Known as__________).

A. Accumulation period
B. Lump-sum payment period
C. Payment release period
D. Pay-out period

Correct Answer: D
Section: Volume A
Explanation

Explanation/Reference:

QUESTION 101
Annuities provide the annuitants with ________________.

A. Tax-deferred earnings
B. Tax-accrued earnings
C. Tax-free earnings
D. Maximum level of earnings

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 102
Surrender charges usually apply only if the annuity has been in free:

https://www.gratisexam.com/
A. For a year
B. For a maximum period of time
C. For a minimum period of time
D. For less than a year

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 103
“Insurers guarantee a minimum rate of interest dunning the time that the account is growing and periodic payment amounts of a specified amount for a stated
period (either specific period 10 years indefinite period etc).” This statement is related to:

A. Variable annuities
B. Life time annuities
C. Term period annuities
D. Fixed annuities

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 104
The actual amount of payment the annuitant pays is based on:

A. Amount of money invested and interest rate

B. Length of the time principle has been invested
C. No of annuity payment to be made
D. All of the above

Correct Answer: D
Section: Volume B

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 105
“A special type of annuity that involves a contract between the annuitant and insurer in which insurer credits the annuity account with return amounts based on
changes in an equity index such as the S&P500 (composite price index),” is:

A. Price indexed annuity

B. Variable index annuity
C. Stock indexed annuity
D. Equity indexed annuity

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 106
If participation rate in an equity indexed entity is 80% and the index increases 9%, the return credited to the annuity would be:

A. 7.1%
B. 7.2%
C. 7.25%
D. 7.3%

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 107
In case of an annuity with a spread of 3%, if the index gained 9%, the return credited to the annuity would be:

https://www.gratisexam.com/
A. 11%
B. 27%
C. 6%
D. 3%

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 108
Which one of the following does NOT depicts a common indexing method?

A. The annual ratchet

B. The point to point method
C. The high water mark method
D. The low water mark method

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 109
An index method that credits index-linked interest based on any increase in index value from the index level at the beginning of the contract’s term to the highest
index value at various points during the contract’s term is called:

https://www.gratisexam.com/

A. Point to point method

B. Annual retuned

https://www.gratisexam.com/
C. The high watermarks method
D. The low water mark method

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 110
Which one of the annuities, mentioned below, is not regulated by the SEC:

A. Fixed annuities
B. Variable annuities
C. Mixed annuities
D. Expired annuities

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 111
Non-deposit investment product includes:

A. Fixed annuities
B. Variable annuities
C. Mixed annuities
D. Both A&B

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 112
Under the interagency statement when a bank recommends or sells non-deposit investment product it should inform the customer that the product is:

A. Having high interest rate

B. Not insured by FDIC
C. Not a deposit or other obligation of, or guaranteed by the depository institution
D. Only B&C

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 113
The interagency statement calls for these disclosures to be provided EXCEPT:

A. Orally during any sales presentation

B. Orally when investment advice concerning the non deposit investment products is provided
C. In advertisement and other promotional materials as specified in the interagency statement
D. None of these

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 114
Derivates can be effective low cost tools for managing expose experience losses due to:

A. Interest rate change

B. Master agreements
C. Commodity price change
D. All of these

https://www.gratisexam.com/
Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 115
In option- type securities contracts the option’s price is called:

A. Mark up
B. Premium
C. Return value
D. Both A&B

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 116
Derivatives can be:

A. Exchange traded securities

B. Exchange traded options
C. Over-the-counter traded securities
D. Either A or C

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 117
Basic control/s to consider when auditing derivates strategies is/are:

https://www.gratisexam.com/
A. “Created” Reports
B. Risk or position limits
C. Highly volatile markets or illiquid markets
D. Board-approved guidelines

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 118
The entity has comprehensive, written credit risk management policies and procedures for derivative activities. This addresses to:

A. Counterparty Risk
B. Market risk
C. Market liquidity Risk
D. Legal Risk

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 119
Which of the following does NOT come under the consideration of systematic or interconnection risk?

A. Risk management systems that include limits or controls on interconnection risk to which the entity is willing to expose itself.
B. Provisions for monitoring systematic risk effectively
C. Contingency plans setting forth actions to be taken when system-wise market disruptions occur
D. Due diligence of enforcement activities

Correct Answer: D
Section: Volume B

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 120
Electronic financial services audits should focus on whether there are adequate internal controls in place to protect customer transactions information, and assets.
Some key steps in clued all of the following EXCEPT:

A. Determine whether disaster contingency plans for the failure of internet transactions or communication are adequate, regularly updated
B. Determine whether disaster contingency plans for the failure of internet transactions or communication are adequate, regularly tested, and regularly updated
C. Determine whether an access is controlled by a firewall
D. Stress test analyzing changes in market and credit conditions are appropriate. The market assumptions are reasonable

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 121
Visa and MasterCard have teamed up to develop payment card Industry ( PCI) Data Security standards to govern the safekeeping of account information. Which of
the following is NOT out of the major goals of PCI standards?

A. Build and maintain secure network

B. Protect Card holder Data
C. Maintain vulnerability management program and regularly monitor and test networks
D. Annual review of an information security policy

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 122
I- Restrict access to data by business need-to-know
II- Assign Unique ID t each person with computer access

https://www.gratisexam.com/
 III-Restrict physical access to cardholder data

The above requirements of PCI (Payment Card Industry) achieve which one of the following goals?

A. Implementation of Strong access control measures

B. Protection of card holder
C. Maintenance of information data security policy
D. Building and maintenance of a secure network

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 123
Cash equivalent may include:

A. Commercial Papers
B. Returned Checks
C. Spotted debits
D. Only A & B

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 124
Cash on hand refers to:

A. Funds in bank
B. Funds at teller windows
C. Funds in vault and in ATM
D. All of these

https://www.gratisexam.com/
Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 125
Due from bank balances are used to:

A. Ensure liquid reserves

B. Protect stored data
C. Restrict physical access to cardholder
D. Facilitate the transfer of funds and to use as compensation for correspondent banking services

Correct Answer: AD
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 126
When looking at account receivables auditors should ensure:

A. Receipts are processed and recorded timely

B. Collections are handled by an outside party
C. Disbursements are made right after the original authorizations
D. Collections are handled by a brokerage house

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 127
At the end of the day all funds in a non-interest bearing checking account are cleared out and moved into a short-term investment account overnight. At the

https://www.gratisexam.com/
beginning of the next day, those funds are put back into the regular account for use that day. Such accounts are called:

A. Zero-balance accounts
B. Sweep Accounts
C. Lock Boxes
D. None of these

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 128
Workpapers serve as the connecting link between the audit assignment, the auditor’s fieldwork, and the final report. Most importantly, the workpapers document the
auditor’s conclusions and the reasons those conclusions were reached. Workpapers also provide a basis for demonstrating compliance with the IIA’s Standards.
Among other things, workpapers may include all of the following EXCEPT:

A. Planning documents and audit procedures

B. Analysis and test of transactions, processes, and account balances
C. Results of substantive testing
D. Audit correspondence that documents the audit conclusions reached

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 129
The reliability (competence) of evidence gathered by auditors is a __________. The reliability of evidence is a key factor in the audit analysis. Relevance is also a
key factor in determining the quality of evidence.

A. Fixed term
B. Variable
C. Determinant
D. Subjective philosophy

https://www.gratisexam.com/
Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 130
Continuous monitoring in systems and networks is a by-product of the increasing demand for immediate and continuous access to reliable information.
Advancements in information monitoring and analysis are being accelerated both by increasing demands for timely and accurate information and by advances in
technology that contribute to the:

A. Intelligence
B. Capabilities
C. Timeliness of evaluating system
D. Both A & B

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 131
Continuous auditing is a method used to automatically perform control and risk assessment more frequently. Technology is the key to enable such an approach.
Continuous auditing changes the audit paradigm from periodic reviews of a sample to ongoing audit testing of ______ percent of transactions.

A. Ninety
B. Ninety nine
C. Seventy
D. Hundred

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 132
Obtaining feedback from client management throughout the audit is encouraged in order to ensure that appropriate information is being obtained and to alleviate
problems at the conclusions of the audit. Some specific components of continual communication to consider include:

A. Keep client management informed of audit issues and concerns as they arise.
B. Submit a draft audit report ensure that accurate and appropriate information has been reported
C. Advise client management of projected audit days and weeks
D. Both A and B

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 133
An objective of an exit conference is that it provides the client management with findings and recommendations identified during the audit which addresses all of the
followings EXCEPT:

A. Allow client management to state concerns and objections to the findings and recommendations
B. Give the client management and the audit team the opportunity to identify and correct any errors or misinterpretations that may appear in the draft report
C. It should include a description of significant noteworthy accomplishments and issues that need further work
D. Provide the audit team with the formal opportunity to explain the remaining steps in the audit process prior to the release of the final report

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 134
“An element of information, from a transaction to an entire system, is appropriately entered, developed, changed, or used with proper authority.” Which of the
following element of integrity supports this statement?

A. Authorized

https://www.gratisexam.com/
B. Accurate
C. Complete
D. Timely

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 135
Elements of information and process integrity are that it should be authorized, accurate, complete, timely, recorded processed, and reported in the proper time.
Each of the elements in the above has a relationship to the:

A. Selection of data
B. Collection of data
C. Classification of data
D. All of these

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 136
Some organizations have information protection policies that place the burden of information protection on managers in individual organizational units. An
information protection policy may include:

A. Statements that define information as an asset that must be protected to different degrees based on its sensitivity, criticality, and value, regardless of the media
on which it is stored, the manual or automated systems that process it, or the methods by which it is distributed
B. Statements outlining the responsibilities of information owners, custodians and users
C. Definitions of the previously audited data and its classifications
D. Both A & B

Correct Answer: D
Section: Volume B

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 137
A sound data classification scheme sets the foundation for the effective implementation of access control to ensure that data is adequately protected. The elements
of a data classification scheme are as follows EXCEPT:

A. Reporting
B. Storing
C. Collection
D. Public information

Correct Answer: CD
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 138
Information technology general controls set the foundation for effective control over computerized information system assets. General controls apply to the entire
computer operation. Which of the following is/are NOT out of these controls?

https://www.gratisexam.com/

A. Administrative controls
B. Security controls
C. Security administration
D. Input controls

Correct Answer: D
Section: Volume B
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 139
System tailoring is accomplished by setting optional system parameters and, therefore, has an impact on system performance and security. Control techniques for
system’s software include:

A. Setting appropriate system parameters and security options for operating system
B. Verifying the accuracy of output through manual or automated reconciliation activities
C. Using the security features of security software effectively
D. Controlling procurement and maintainace of software licenses

Correct Answer: ACD

Section: Volume B
Explanation

Explanation/Reference:

QUESTION 140
Feasibility studies and cost benefit analysis Approval process for initiating system development and implementation of systems that are developed Change control
procedures for new system developments and modifications to existing systems to ensure that only authorized changes are moved to production General and
detailed design specification Project review, including periodic milestones reviews and post-implementation reviews Contracting procedures that include the
requirements for describing expected project deliverables such as system components and source codes, project timeframes, estimated hours, and the maximum
allowable expenses for each phase These are some of the standards of:

A. System development methodology

B. Output controls
C. Security controls
D. Collection of Classified information

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 141

https://www.gratisexam.com/
COBIT (Control Objectives for Information and Related Technology) is based on existing Information Systems Audit and Control Foundation, control objectives
enhanced with existing and emerging international technical, professional, regulatory, and industry-specific standards. COBIT has four domains or high-level
classifications. Which is of the following is NOT out of those domains?

A. Planning and organization

B. Acquisition and implementation
C. Delivery and support
D. Evaluation

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 142
The purpose of audits of financial statements is to issue an opinion on the fairness of the financial statements and to evaluate all of the following assertions (explicit
or implicit) by management EXCEPT:

A. Existence or occurrence assertions address whether available information addresses actual transactions, assets, and liabilities
B. completeness assertions address whether all material financial information is included in financial statements
C. Rights and obligations assertions address whether the entity has legal rights to the assets and obligations to the liabilities disclosed on the financial statements
D. Presentation and disclosure assertions address whether the elements of the financial statements are properly organized, classified and disclosed

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 143
Standards related to information technology are not as well-developed or universally accepted as standards in some other audit areas. Financial statements that are
fairly presented meet the following ____________: Generally accepted accounting principles are used Appropriate accounting principles are used Financial
statements address matters that may affect their use or interpretation Financial statements classify and summarize information in a reasonable manner Financial
statements reflect underlying transactions and events in a way that facilitates the presentation of the financial position, results of operation , and cash flows

A. Limitations

https://www.gratisexam.com/
B. Guidelines
C. Objective controls
D. Processing controls

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 144
The balance sheet is the fundamental report of a company’s financial position. An examination of a balance sheet will assist in determining:

A. If the company meets its financial obligations

B. The amount of money invested in outside the company
C. The company’s debt ratio
D. The type of assets that company has purchased with its debt financing

Correct Answer: AC
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 145
A statement of cash flows in a financial report that shows incoming and outgoing money during a particular period (often monthly or quarterly). It does not include
_________ items such as depreciation. The statement is a useful tool for determining the short-term viability of a company, particularly its ability to pay bills.

A. Non-cash
B. Depreciation related
C. Depletion related
D. Lon-term debt

Correct Answer: A
Section: Volume B
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 146
Off-balance-sheet usually means an asset or debt or financing activity not on the company’s balance sheet. It could involve a lease or a separate subsidiary or a
contingent liability such as
___________.

A. A letter of credit
B. Scrutiny
C. Debt securities
D. Term papers

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 147
Commercial, residential and consumer are three basic types of:

A. Short term working capital loans

B. Asset-based financing
C. Installment loans
D. Loans

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 148
_____________ loans allow the consumer to repay a loan over a set period. They require periodic principal and interest payments The loan is generally secured by
the item being purchased. Automobile loans or real estate mortgage loans are common types of such types of loans.

https://www.gratisexam.com/
A. Installment loans
B. Consumer loans
C. Residential loans
D. Asset-based loans

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 149
“These are usually secured by mortgages, deeds of trust, land contracts, or other types of real estate liens. Interest rates for residential mortgages loans may be
fixed or variable. Repayments of principal may be set up for full amortization, negative amortization, or partial amortization with a balloon payment at a specified
rate.” What are these?

A. Asset-based loans
B. Residential loans
C. Consumer loans
D. Term loans

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 150
All lending institutions assume some loans will not be repaid and thus estimate the losses they expect from their loan portfolio. Management of the lending
institution sets a reserve for loan losses at a given point based on factors such as:

A. The number and type of loans made

B. The quality of loans made
C. The number of problem loans
D. All of these

Correct Answer: D

https://www.gratisexam.com/
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 151
Exception reports generated by the lending institution are designed to identify past-due loans. Auditors should review these exception reports to identify an
unusually high number of exceptions and old or unusual exceptions that might indicate that:

A. The institution is not following up on exceptions in a timely manner

B. The institution is following up on exceptions in a timely manner
C. The auditor is not following up on exceptions in a timely manner
D. The competitor is not following up on exceptions in a timely manner

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 152
Financial institutions regularly identify uncollectible and charge them off against the reserve for loan losses. Auditors should ensure that the institution has
developed adequate criteria for charge-offs and select a sample of charged-off loans whether they are handled properly.

Another useful test is:

A. To select a sample of loans that are significantly paid inorder to determine whether they meet the charge-off criteria and assess why they have not been
charged off
B. To select a sample of loans that are significantly paid in order to determine whether they meet the past criteria and assess why they have not been charged off
C. To select a sample of loans that are significantly paid in order to determine whether they meet the charge-off criteria and assess why they have not been
charged off
D. To select a sample of loans that are significantly paid in order to determine whether they meet the charge-off criteria to meet the current requirements

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 153
Deposit accounts are either interest bearing or non-interest bearing. Interest bearing accounts includes _________ and ___________. The types of accounts bear
interest for a fixed period of time and are known as time deposits.

A. Savings accounts, certificates of deposit

B. Savings accounts, term deposit
C. Certificate of deposit, Savings accounts and certificates of deposit
D. Savings accounts, certificates of deposit and non-interesting bearing account

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 154
In the United States, banks are required to report cash deposits that exceed $10,000 a day to any one account, regardless of how many branches or deposits have
been used in the transactions. Banks are also required to report when cash is used to purchase cashier’s checks, money orders, traveler’s checks, or bank checks
in excess of $3000. In the Untied States, accounts are federally insured by the Federal Deposit Insurance Corporations (FDIC). An individual is limited to
__________ in insurance coverage at each bank (including branches).

A. $50,000
B. $75,000
C. $100,000
D. $10,000

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 155
The financial institutions’ general ledger records activity on deposit accounts. Posting of time deposit transactions usually occurs on the day transaction occurs or
the next day. The following audit objectives and steps should be considered when performing an audit of deposit accounts EXCEPT:

https://www.gratisexam.com/
A. Assess the adequacy of policies, procedures, and internal controls regarding deposit accounts
B. Determine whether documentation exists to show that accounts are properly opened and closed in a timely manner and in accordance with establish policies.
Ensure that applications and signature cards are on file. Send confirmations on a sample of accounts. If any confirmations are not received, compare the
signature on recent checks or transactions to the signature card for the account
C. Determine whether deposit transactions and any expense is posted properly
D. Ensue that there is adequate separation of duties between the posting and reconciling functions. Recalculate a sample of reconciliations to verify accuracy. Note
whether any nusual transactions were properly verified and authorized

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 156
Most corporations have an annual meeting where stockholders have the opportunity to vote on important issues. These issues include:

A. Election of the board of directors (the officers of the corporation)

B. Changes to the corporate charter
C. Reconciliation
D. Takeovers

Correct Answer: AB
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 157
Stockholders are generally allowed one vote per share held. As a result, individuals who hold large blocks of share are more likely to be board members. Which of
the following are out of the basic rights of stockholders?

A. Proxy rights
B. Reorganization rights
C. Exception rights
D. Liquidation rights

https://www.gratisexam.com/
Correct Answer: AD
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 158
Although these rights do not always exist, if they do, shareholders are entitled to buy any new issue of stock in proportion to their holdings. If a person owns 5% of a
corporation, then he or she would have the right to buy 5% of newly issued shares. These are:

A. Proxy rights
B. Preemptive rights
C. Inspection rights
D. Liquidation rights

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 159
Shareholders also have the right to receive declared dividends. Besides the potential for capital appreciation, investors also have the potential to receive dividend
income. There are several types of dividends. For instance, an investor with 500 shares of stock selling at $50 per share would have 1,000 shares at $25 per share
after a 2-for-1 split. These types of dividends are called:

A. Cash dividends
B. Stock split
C. Preferred dividends
D. None of these

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 160
Preferred stock is similar to common stock in that it represents ownership in a corporation.
Preferred stockholders generally receive as fixed dividend rate. The types of preferred stock include all of the following EXCEPT:

A. Cumulative preferred stock

B. Non-cumulative preferred stock
C. Participating preferred stock
D. Invertible preferred stock

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 161
_________ stock generally costs more than __________ because of the additional rights its stockholders receive.

A. Cumulative preferred stock, Non- Cumulative preferred stock

B. Non- Cumulative preferred stock, Cumulative preferred stock
C. Cumulative preferred stock, Cash dividends
D. Preferred stock, Common Stock

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 162
Although generally attached to bonds or preferred stock, warrants can also be attached to other securities, such as speculative stock. Warrants allow holder to buy
more stock as its value appreciates. Below are the terms that must be considered in order to understand warrants EXCEPT:

A. Warrants are generally attached to a bond or preferred stock and carry the right to purchase common stock at a fixed price
B. Detached warrants can be traded and have their own value based on the current market and exercise prices. If a warrant is not detachable, it has no individual
market value

https://www.gratisexam.com/
C. Warrants typically expire after a number of years
D. When exercised, a warrant is relinquished in return for shares of common stock at the current market price

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 163
___________ are investment securities that do not fall under one of the other types of securities. Examples of these are Type III securities including corporate
bonds and municipal bonds.

A. Type II Securities
B. Type III Securities
C. Type I Securities
D. Type IV Securities

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 164
A residential mortgage-related security that is rated investment grade or is the credit quivalent thereof, or a residential ortgage security that is rated investment
grade in one of the wo highest investment grade rating categories. It usually qualifies as:

A. Type II Securities
B. Type III Securities
C. Type I Securities
D. Type IV Securities

Correct Answer: D
Section: Volume B
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 165
These are used to speculate on the direction of interest rates. The trading of these contracts is limited. The future market is the main trading market for securities
based on interest-rate movements. What are these?

A. Put Options
B. Call Options
C. Interest rate options
D. Index options

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 166
Options are quoted daily in the newspapers. The listing provides the name of the underlying stock and:

A. Its closing price that day

B. The strike price of the option
C. Its closing price that day, the strike price of the option, the closing prices(premiums) of the call and 3 put contracts trading closest to expiration
D. The closing prices (premiums) of the 3 call and 3 put contracts trading closest to expiration

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 167
Options are quoted daily in the newspapers. The listing provides the name of the underlying stock and its closing price that day, the strike price of the option, the
closing prices(premiums) of the 3 call and 3 put contracts trading closest to expiration. Listings can be divided into categories. Which of the following is/are out of
those categories?

https://www.gratisexam.com/
A. Option Class
B. Option Series
C. Option Statuses
D. Option Lists

Correct Answer: AB
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 168
Banks generally record securities transactions as of trade date. However, it is acceptable to record the transactions as of the _________ if the difference between
the settlement date and trade date is not materially different.

A. Market closing date

B. Settlement date
C. A day before the closing date
D. None of these

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 169
Banks can record interest earned on trading securities as either interest income or trading income. However, the recommended method is:

A. To report interest income separately from trading income if the amount is material
B. To report interest income with trading income if the amount is material
C. To report interest income separately from trading income if the amount is not material
D. To report interest income with trading income if the amount is not material

Correct Answer: A
Section: Volume B

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 170
Securities available for sale should be reported at current market value. When this type of security has an unrealized gain or loss:

A. It is reported on balance sheet

B. It is reported on income statement
C. It is not reported on income statement
D. It is reported on cash flow statement

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 171
When conducting an audit of securities investments, the following objectives and audit steps should be considered EXCEPT:

A. Determine whether policies, procedures, practices, and internal controls over security investments are adequate and being followed
B. Determine whether transactions are properly authorized and recorded. Verify that dividend or interest income is accurately calculated and recorded in the
general ledger
C. Determine that the institution has an adequate process for reconciling subsidiary records to the general ledger on a regular basis
D. Determine whether the institution adequately control and records the sold securities in balance sheet

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 172
Which of the following is/are included in the specific steps for auditing short-term investments?

https://www.gratisexam.com/
A. Ensure that policies and procedures for short-term trading activities exist, are periodically reviewed for changes, and are properly approved
B. Review to ensure that trading policies include allowed and restricted trading instruments, approved traders
C. Review the short-term trading activity to ensure compliance with trading policies and procedures and applicable regulatory environment
D. All of the above

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 173
Notes and bonds are long-term debt instruments. Long-term debt instruments are sold at ______________ when the market rate _____________ the stated
interest rate.

A. Discount, exceeds
B. Premium, exceeds
C. Discount, less than
D. Premium, less than

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 174
These are similar to coupon bonds in that ownership is based on possession. These have not been issued for the last couple of decades, however those previously
issued will continue to exist until they reach maturity. What are these?

https://www.gratisexam.com/

A. Registered bonds

https://www.gratisexam.com/
B. Bearer bonds
C. Book-entry bonds
D. Putable bonds

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 175
A bond currently priced at $1,250 with a 10% nominal yield of $100 would have a current field of _____________. The same bond priced at $800 would have a
current yield of __________.

A. 9%, 12.5%
B. 12.5%, 9%
C. 8%, 12.5%
D. 12.5%, 8%

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 176
Bond yield is the return on a bond. Which of the following terms may apply to bond yields?

A. Nominal yield
B. Market yield
C. Yield to Maturity
D. Both A & C

Correct Answer: D
Section: Volume B
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 177
It is a contract that defines corporation and bondholders responsibilities and is designed to protect the right of the bondholders. A trustee (most often a commercial
bank) is generally appointed to ensure that the obligations defined in the agreement are of trust indenture must e filled with SEC. What is it?

A. Bond certificate
B. Trust indenture
C. Secured bonds
D. Collateral trust

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 178
Unsecured bonds are not backed by assets and provide no claim on assets for bondholders These include:

A. Debenture
B. Subordinated debenture
C. Collateral trust bonds
D. Trust indenture

Correct Answer: AB
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 179
The U.S government is the largest borrower in the world and has a variety of debt instruments. These government obligations or issues are a safe form of debt
security, and there has never been a default. The “full faith and credit of the government” back these issues. Some terms and definitions include:

A. Negotiable securities

https://www.gratisexam.com/
B. Non-negotiable securities
C. Series YY bonds
D. Series NN bonds

Correct Answer: AB
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 180
____________ are the instruments with maturities of 30 years for new issues (10-to-30-years issues were allowed in the past). The amounts range from $1,000 to
$1,000,000 and are sold at auction in a manner similar to that for treasury notes.

A. Treasury notes
B. Treasury receipts
C. Treasury bonds
D. Treasury bills

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 181
Municipal bonds are issued by state and local governments, U.S. territories, and non-federal public agencies such as school districts, cities, and airport authorities.
Municipal debt is considered the second safest form of debt security after U.S. government obligations. Some types of municipal bonds include all of the following
EXCEPT:

A. General obligation bonds

B. Revenue bonds
C. Single barreled bonds
D. Moral obligation bonds

Correct Answer: C
Section: Volume B

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 182
These are the most common type of municipal bonds and are backed by projected revenue streams from the infrastructure built by the bond. These revenues can
be in the form of rental r user fees for facilities or even tolls for road improvements. What are these?

A. Doubled barreled bonds

B. Moral obligation bonds
C. Special tax bonds
D. Revenue bonds

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 183
Negotiable certificates are:

A. Mutual funds that invests in short-term liquid securities.

B. Tradable certificates issued by commercial banks in exchange for time deposits.
C. Are instruments issued by corporations with good credit ratings and are in effect an unsecured promissory note
D. Are U.S. currency deposited in banks outside the United States

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 184
As interest rate change, the price of an issued bond also changes. The change in price has an inverse relationship to changes in interest rates (if one rises, the
other falls). If new bond issues are paying a higher interest rate than existing bonds, investors will not purchase existing bonds unless:

https://www.gratisexam.com/
A. The bond is discounted
B. The new bond prices fall
C. The new issue is finished
D. The interest rate declines

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 185
Banks should develop policies related to ALM, including specific guidelines regarding risk/reward tradeoffs. The goal is to manage risks while achieving acceptable
returns on investments. In developing these policies bank officials analyze:

A. Cash flows
B. Liabilities
C. Cash flows and liabilities by reviewing historical reports, ratio reports, balance sheet, the income statement, liquidity reports and other available information
D. Liabilities by reviewing historical reports, ratio reports, balance sheet, the income statement, liquidity reports and other available information

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 186
Most municipal and corporate bonds are rated by an independent rating firm such as Standard & Poor’s (S&P) or Moody’s. These ratings provide investors with
information regarding the risk of default on the bond issue. The higher rated bonds are considered _________.

A. Investment grade bonds

B. Speculative bonds
C. Junk bonds
D. Blue chip bonds

Correct Answer: A

https://www.gratisexam.com/
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 187
Auditors should be aware that the investment objectives of a mutual fund are usually based on a risk profile outlined in the fund prospectus. For example,
aggressive growth funds may invest in highly volatile stock issues and a money market fund may invest in lo –risk money market instruments. Other funds have
investment objectives based on the type or location of companies they invest in, such as:

A. Funds that invest only in non-profit organizations

B. Funds that invest only in environmentally conscious companies
C. Funds that invest only in U.S. government organizations
D. None of these

Correct Answer: B
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 188
Risks related to assets/liability management that auditors should be aware of include all of the following EXCEPT:

A. Deficient information processing, accounting, reconcilement, and reporting systems in relation to transaction volume and complexity
B. Failure to effectively manage third-party vendors
C. Failure to use legal counsel effectively
D. Deficiencies in the integration of purchase-oriented businesses with the responsibilities associated with fiduciary relationships

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 189

https://www.gratisexam.com/
The management of index funds is _________ than the management of non-index funds, because an index fund manager only needs to track a relatively fixed
index of securities.

A. More “Passive”
B. More “Active”
C. Less “Passive”
D. Relatively less “Active”

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 190
A mutual fund that invested primarily in utility companies and bonds would be an example for an income mutual fund. Which of the following risk/s is/are NOT
associated with bond funds?

A. Credit risk
B. Prepayment risk
C. Liquidity risk
D. Interest rate risk

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 191
___________ are a type of mutual funds that is required by law to invest in highly liquid and low-risk securities such as certificates of deposits or government
securities. These funds pay dividends that generally reflect short-term interest rates and are not federally insured. Due to low-risk nature of the investments, these
funds rarely lose money.

A. Money market funds

B. Trust funds
C. Collateral funds

https://www.gratisexam.com/
D. Index funds

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 192
This agreement occurs when a security is sold with an agreement to buy it back. The repurchase date is usually very short term, often one day. Dealers sell a
portion of their securities to entities with cash reserves and agree to buy them back for the principal plus interest. What is this?

A. Certificate of deposit
B. Commercial Paper
C. Money market fund
D. Repurchase agreement

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 193
The fund prospectus is the document that provides a general overview and description of the fund. The intent is to provide a potential investor with enough
information to make a sound financial decision. The following information is generally placed in a prospectus EXCEPT:

A. General description of the fund

B. Condensed financial information (including annual rate of return and fees)
C. All the management staff
D. How to purchase and redeem shares

Correct Answer: C
Section: Volume B
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 194
Auditors testing mutual funds transactions will typically focus on whether customer purchases and redemptions are accounted properly. In cases where brokers are
used to maintain customer accounts, auditors may need to confirm:

A. The number of shares held by the broker

B. The number of shares held by the dealer
C. The number of shares held by the shareholder itself
D. The number of shares held by the mutual fund

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 195
Employee benefits are generally considered non-wage compensations designed to enhance any employee’s salary compensation. However, it should be noted that
payroll is one of the largest operating expense in many banks. Losses can occur if a bank does not have adequate controls over this function. The largest risk/s
bank face in this function is/are:

A. Making salary payments to employees no longer on the payroll

B. Paying employees for unearned overtime, sick time, or vacation time
C. Entering improper or unauthorized salary
D. All of these

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 196
All members of a group insurance plan (group insureds) are covered under a single contract, known as a master group insurance contract. The employer or entity
purchasing the group insurance is known as group policyholder. In _____________, group insureds do not pay any premium for the coverage.

https://www.gratisexam.com/
A. Noncontributory plan
B. Contributory plan
C. Life insurance
D. Preexisting provision condition

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 197
Group insurance policies typically include a preexisting condition provision that excludes:

A. Coverage for conditions that the individual received treatment for during specified period prior to the effective date of coverage
B. Provisions to prevent individuals covered under more than one plan from receiving enefits greater than the expense incurred
C. Provisions to prevent mutual fund covered under more than one plan from receiving enefits greater than the expense incurred
D. Coverage for conditions that the individual received treatment for after specified period rior to the effective date of coverage

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 198
Most of the group health policies contain a _____________to prevent individuals covered under more than one plan from receiving benefits greater than the
expense incurred.

A. Coordination of benefits provisions

B. Preexisting condition provision
C. Consumer-driven health
D. Renewable term provision

Correct Answer: A
Section: Volume B

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 199
Many group disability income policies contain a physical examination provision that requires a doctor to examine a claimant before the claim is paid. The insurer
may also require the claimant to undergo periodic examinations to verify:

A. That the disability still exists

B. That the correct amount was paid
C. That the claim is properly satisfied
D. None of these

Correct Answer: A
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 200
_____________ is a type of insurance that employers provide for employees. Injured employees must file with the agency that administrates it in their state and
notify their employer. It pays: Medical expenses for employees and rehabilitation benefits for employees who become disables through work Death benefits for
survivors of employees who die because of an occupational injury or disease

A. Dental insurance
B. Presumptive disability provision
C. Consumer-driven health plan
D. Worker’s compensation

Correct Answer: D
Section: Volume B
Explanation

Explanation/Reference:

QUESTION 201

https://www.gratisexam.com/
Securities lending refers to the practice of temporarily transferring securities to a borrower with the intent that the lender will buy them back at a future date. The
borrower is required to return the securities to the lender, either on demand or at a specified time. A major reason for securities lending is:

A. To circulate the issued capital

B. To facilitate short sale
C. To facilitate over the counter trade
D. To fasten secondary market trading

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 202
Auditors should be aware of the following control and monitoring activities typically associated with securities lending EXCEPT:

A. Reviewing counterparties for credit worthiness and obtaining master trade agreements and credit approval for counterparties before entering into stock-loan or
stock-borrow transaction
B. Establishing transaction limits by counterparty
C. Obtaining physical possession or control of all collateral
D. Establishing position and credit limits by counterparty

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 203
Which of the following activity/ies should be considered by the auditors whenever reviewing situations where broker-dealer finance proprietary or customer activity
through collateralized bank loans?

A. Ensuring that customer, noncustomer, and firm bank loans are separately maintained and that procedures are in place to prevent commingling of collateral
B. Maintaining separate accounts in the general ledger for the securities collateralizing each loan
C. Obtaining collateral from the counterparty
D. Reconciling the repurchase and reverse repurchase subsidiary ledgers to the stock record and general ledger daily. Out-of-balances are recorded as suspense

https://www.gratisexam.com/
 items and researched immediately

Correct Answer: AB
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 204
Reviewing counterparties for creditworthiness and obtaining master trade agreements and credit approval for counterparties before entering into a repurchase or
reverse repurchase agreement Obtaining collateral from the counterparty Marking to market all collateral daily; if a deficit (within established guidelines) exists,
additional collateral may be obtained from the counterparty Reconciling the repurchase and reverse repurchase subsidiary ledgers to the stock record and general
ledger daily. Out-of-balances are recorded as suspense items and researched immediately These are actually:

A. Control and monitoring activities related to purchase and reverse purchase agreement
B. Review activities where broker-dealer –dealers finance proprietary or customer activity through collateralized bank
C. Auditors should be aware of the following control and monitoring activities typically associated with securities lending
D. None of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 205
“A valid contract involves each party giving something of value. This exchange of value, or consideration, may take the form of money, action, or promise. For
insurance contracts, the insured’s consideration is the payment or premiums and a promise to fulfill the conditions of the contracts, and the insurer’s consideration
is the promise to pay after a loss occurs.” This is related to an element in an insurance policy contract. It is known as:

A. Agreement
B. Consideration
C. Competent parties
D. Legal purpose

Correct Answer: B
Section: Volume C

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 206
Insurance is a method of transferring, for a fee, the financing responsibility for the risk to another party. Insurance polices are legal contracts. There are four
elements that constitute a legal, binding contract. Which of the following is NOT out of those elements?

A. Agreement
B. Periodic review
C. Competent parties
D. Legal purpose

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 207
It is a characteristic of insurance policy according to which the insured decides whether or not to pay the premium to be covered by the policy. If the insured pays
the premium, the insurance coma pay is obliged to make payments as stated in the policy. What is it?

A. Unilateral
B. Bilateral
C. Incontestable
D. Adhesion

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 208
Insurance contracts are also considered ____________ in that they are legal documents that required the insurer to pay if covered events occur. Because the
insurance company creates the contract, it is liable if there are any ambiguities in the contract language.

https://www.gratisexam.com/
 https://www.gratisexam.com/

A. Contracts of adhesion
B. Bilateral
C. Unilateral
D. Incontestable

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 209
Insurance companies assist individuals in managing personal risk through risk pooling. Risk pooling is based on fact that the probability of any one type of loss
occurring for a given individual is small. Therefore insurers can insure:

A. A large number of people against a given peril, based on the knowledge that only a small percentage of those insured will ever file a claim for the particular peril
B. Only few people against a given peril, based on the knowledge that only a small percentage of those insured will ever file a claim for the particular peril
C. A large number of people against a given peril, based on the knowledge that a large percentage of those insured will ever file a claim for the particular peril
D. None of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 210
Whole life policies accrue a cash value that the insurer must surrender to the policyholder if the policy does not remain in force until the policyholder’s death. The
actual cash value payable to the policyholder in this circumstance would be:

https://www.gratisexam.com/
A. Plus any surrender charges
B. Less any surrender charges
C. Plus policy repayments outstanding
D. Less any surrender charges and policy repayments outstanding

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 211
Whole life policies offer lifetime coverage at a level premium rate that does not increase as the insured ages. Whole life policies are classified in all of the below
mentioned categories EXCEPT:

A. Continuous premium policies

B. Limited payment policies
C. Decreasing life policies
D. Single premium policies

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 212
_____________ insures two lives under one policy. Death benefits are paid to the surviving insured. The surviving insured usually has the option of purchasing an
individual whole life policy of the same face amount without providing evidence of insurability.

A. Joint whole life policies

B. First-to-die policies
C. Modified premium whole life policies
D. A & B are one and the same category

Correct Answer: D
Section: Volume C

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 213
These policies provide a death benefit when the insured dies during a specified period. The term of this type of policy is usually not less than one year, but may be
up to 40 years or more. It provides only temporary protection because coverage ends at the end of the term of coverage stated in the policy. What are these?

A. Term life insurance policies

B. Level term insurance policies
C. Decreasing term life insurance policies
D. Whole life insurance policies

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 214
For example, $50,000 five-year policy might decrease to $40,000 in benefits payable the second year, to $30,000 the third year, to $20,000 the fourth year, and to
$10,000 in the final year. This is an example of:

A. Level term insurance policies

B. Decreasing term life insurance policies
C. Modified premium whole life policies
D. First-to-die policies

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 215
Universal life policies are a form of permanent life insurance that has flexible premiums, flexible face amounts, and separate pricing for the three major pricing
categories. Which of the following is/are out of those categories?

https://www.gratisexam.com/
A. Mortality charges based on the insurer’s risk classification
B. Internet rate paid on the cash value
C. Expenses associated with administering the policy
D. All of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 216
Purchasers of universal life policies specify the policy’s face amount and whether the death benefit will be level or vary as the policy’s cash value changes. Under
level death benefit policies the death benefit payable:

A. Equals the policy’s face amount

B. More than the policy’s face amount
C. Less than the policy’s face amount
D. Is policy’s face value plus any accumulated cash value

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 217
____________insurance provides a specified benefit amount in either of the following cases:

If the insured survives to the maturity date of the policy is reached.

If the insured dies before the maturity date of the policy is reached.

A. General life insurance

B. Whole life insurance
C. Endowment insurance
D. Term life insurance

https://www.gratisexam.com/
Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 218
General liability insurance covers the major liability exposure of a business, including lawsuits against an organization’s facilities or products. General liability
insurance does not cover:

A. Liabilities that a business incurs through the use of its automobiles

B. Liabilities that a business incurs through the use of its labor and machinery
C. Liabilities that a business incurs through the use of its land and other capital products
D. All of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 219
__________pays damaged insured by the injured and the insured’s passenger when injured in an auto accident caused by a motorist without liability insurance. The
coverage also covers accidents caused by hit-and-run drivers.

A. Uninsured motorist coverage

B. Auto coverage
C. Medical coverage
D. Liability coverage

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 220
Homeowner policies combine property and casualty coverage into the same policy (known as multi-line policies). Homeowner policies provide four types of property
coverage. All of the following are out of those EXCEPT:

A. Dwelling
B. Personal property
C. Loss of use
D. Medical coverage

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 221
It provides additional living expenses when the home is unlivable, so home owners can continue to live comfortably. While the home is made livable, the
homeowner policy will pay for items such as rented rooms at a hotel, restaurant meals, and laundry expenses. What is it?

A. Dwelling
B. Personal property
C. Loss of use
D. Medical coverage

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 222
Personal liability covers claims for bodily injury or property damage caused by the insured. And, Medical payment provides a low level of medical payment to help
avoid legal action between the insured and the injured part, regardless of whether or not the insured is legally liable for the incident. These are two major types of
liability coverage provided by:

A. Homeowner policies

https://www.gratisexam.com/
B. Term insurances
C. Auto coverage policies
D. Casualty insurance policies

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 223
Foreign currency futures contracts may be legitimately traded either on a recognized futures exchange or in the ___________, which generally involves trading
between large institutions such as banks and corporations.

A. Secondary security market

B. Interbank market
C. Over the counter market
D. Dealers market

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 224
These occur when two parties trade currencies at a mutually agreed upon exchange rate. One trader calls another trader asking for the price of a particular
currency, and the second trader quotes both buying and selling prices for that currency. What are these?

A. Spot transitions
B. Forward transitions
C. Backward transitions
D. None of these

Correct Answer: A
Section: Volume C
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 225
Audits of foreign exchange transactions may include of the following objectives and tasks EXCEPT:

A. Determine whether internal controls over the authorization of transaction are adequate
B. Determine whether the valuation of transactions is properly calculated
C. Determine whether net assets, dividends, interest, and taxes are properly calculated and recorded
D. Determine that transactions are properly recorded on cash flow statement

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 226
Asset/liability management is a planning tool designed to maximize earnings. ALM tries to create optimal risk/reward decisions and focuses on creating prices that
achieve a desired spread. A sound ALM policy must manage many types of risks such as:

A. Credit risk
B. Liquidity risk
C. Capital risk
D. All of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 227
The tax implications are to be considered in case of life insurance. As, you can take out in chunks to supplement the income, and minimize tax burden, while
keeping the majority still under the tax differed status (Not to mention the benefit of Roth IRA).So, the end result of what you have is for disposable income is once
again better with the:

https://www.gratisexam.com/
A. 401K
B. Whole life Insurance
C. Term life Insurance
D. None of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 228
Main areas within financial services are:

A. Banking
B. Stock Exchange
C. Operations
D. All of these

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 229
Which one of the following Factors does NOT ensure the financial health and security of the organization?

A. Asset management and protection

B. Capital allocation management
C. Financial risk analysis and management
D. None of these

Correct Answer: D
Section: Volume C
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 230
The companies strive to improve customer acquisition, services and retention through the use of following methods EXCEPT:

A. Market Analysis
B. Customer relationship management
C. One-to-one marketing
D. None of these

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 231
Sarbanes Oxley and bases are:

A. Financial service institutes

B. Customer agencies
C. Fraud detecting companies
D. Regulatory reporting requirements

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 232
Financial services organizations are challenged to provide responsible fiduciary management while:

A. Increasing profitability and competitive differentiations

B. Balancing profitability and competitive differentiations

https://www.gratisexam.com/
C. Decreasing risk and fraud activities
D. All of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 233
All of the following are financial instrument EXCEPT:

A. Prepaid capital
B. Debt securities
C. Equity securities
D. Insurance polices

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 234
The term umbrella market segmentation is referred to:

A. Financial services
B. Insurance companies
C. Banks
D. Brokerage Houses

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 235
Some of the countries that do not permit companies to use IAS without a reconciliation to domestic generally accepted accounting principals are all EXCEPT:

A. US (United States), Canada

B. Japan
C. Hong Kong
D. None of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 236
Basel II aims to improve the security and long-term viability of the financial system by focusing on bank’s ____________

A. Internal control System

B. Supervisory discipline
C. Marketing discipline
D. None of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 237
The enterprise- wide risk management approach focuses both on familiar financial risks and harder to measure—though equally important:

A. Strategic, business level and reputational risks

B. Strategic, operational and reputational risks
C. Strategic, business level and operational level risks
D. None of these

https://www.gratisexam.com/
Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 238
New Zealand’s major trading partners are in the process of adopting or have already adopted, the international’s accounting standards this includes all EXCEPT:

A. Australia and Singapore

B. Hong Kong and European Union
C. United State, Canada and Japan
D. None of these

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 239
The accounting standards in the United State are:

A. Generally accepted accounting principles

B. U.S. Generally accepted accounting principles
C. IFRS Standards
D. None of these

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 240
The EU saving Directive is aimed at effective taxation of saving income in the form of:

https://www.gratisexam.com/
A. Interest payments
B. Inflation
C. Both of these
D. None of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 241
Following are the EU Saving Directives paying agents EXCEPT:

A. Banks and deposit takers

B. Brokers, Registrars and investment funds
C. Castilians and transfer agent
D. All of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 242
EFRAG is the abbreviation of:

A. European Federation Reporting Advisory group

B. European Financial Reporting Advisory group
C. European Financial and Replacement Advisory group
D. European Financial Reporting Administration group

Correct Answer: B
Section: Volume C

https://www.gratisexam.com/
Explanation

Explanation/Reference:

QUESTION 243
The risks associated with operating objectives include all of the following EXCEPT:

A. Customer requirements
B. Technology
C. Competitor
D. Financial institute

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 244
Risks associated with compliance with laws and regulations may actually _________ impact ________ in ________. Choose the correct set.

A. Positively, agencies, long term

B. negatively, goals, short term
C. negatively, institutions, short term
D. None of these

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 245
Risk assessment may be:

A. Quantitative only

https://www.gratisexam.com/
B. Qualitative only
C. Both A&B
D. Qualitative in general and quantitative in specific

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 246
An intelligent risks management platform approaches risk from the:

A. Higher level
B. Moderate level
C. Low/ operational level
D. Both A and B as it depends

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 247
All the statements mentioned below are clear and compelling business benefits of a strategic approach to enterprise-wide risk intelligence; EXCEPT:

A. Remove disputes about whose information is “correct”

B. Improves cross-function, enterprise level analysis.
C. Provides a reusable enterprise intelligence plat form, able to adders new needs
D. None of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 248
Basel Accord II's addition to key factors that an organization encounters is:

A. Credit Risk
B. Market Risk
C. Operational Risk
D. Liquidity Risk

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 249
Asset Management is the term usually given to describe companies that run manual Funds. The largest are those who provide:

https://www.gratisexam.com/

A. Passive Funds
B. ETF (Exchange traded funds)
C. Index Funds
D. All of the above

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 250

https://www.gratisexam.com/
The most common index funds tries to tracks the S&P 500 by purchasing all 500 stocks using the same percentage as the index. Other indices that mutual funds
try to copy include all of the following EXCEPT:

A. Russell 2000
B. Wilshire 5000
C. MCSI-EAFE
D. None of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 251
The primary mechanism for estimating potential losses is mathematical methodology, value at risk (“VaR”) which estimates the exposure to market risk:

A. Within a given level of risk, over a defined time period

B. Within a given financial arrange over a specified level of risk
C. Within an unlimited time period over a specified level of risk
D. None of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 252
Known limitations of VaR methodology include the fact that changes in market may not tend to normal distribution (specifically, that very large movements are more
likely than predicated by the normal distribution assumption); BECAUSE:

A. Correlation between market movement can vary (especially during periods of stress in the market)
B. The changes in present values are not perfectly linearly related to changes market rates.
C. The use of one day horizon does not fully capture the market risk of positions that cannot be liquidated in one day.
D. All of these

https://www.gratisexam.com/
Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 253
Which one of the following is common misinterpretation during the calculation of VaR

A. The VaR calculation is based on an assumption that the portfolio is held constant over the time interval in practice are actively managed so that as adverse
condition develop actions will be taken to mitigate losses As a result the true probability of a lose as large as that predicted may be much less then Fore cast
B. The VaR Forecast is based on what has happened in the past If the future is not like the past the realized losses may be the lager (or smaller then predicted)
C. There is a tendency to interpret VaR as the largest loss that has on X percent probability of being exceeded. The largest that loss that may occur will not be too
much larger than the aR, while for other portfolios (particularly those including highly levered derivatives), it may be many times greater than the VaR.
D. All of the above.

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 254
Historical simulation and model based approach are the methods to calculate:

A. Return on investment
B. Return on Risk
C. Value at Risk
D. Value at par

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 255
Default risk is an alternate term used for:

A. Liquidity Risk
B. Credit Risk
C. Control Activities Risk
D. Operational Risk

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 256
Which of the following best suits in place of question mark?

https://www.gratisexam.com/
A. Risk spectrum
B. Risk platform
C. Risk levels
D. All of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 257
Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows ( _________ );from changing rate relationships among

https://www.gratisexam.com/
different yield curves affecting bank activities ( ____________ ); from changing rate relationship across the spectrum of maturities ( ____________ );and from
internet-related options embedded in bank products ( _____________ ).
Choose the appropriate set.

A. Repricing risk, basic risk, yield curve risk and option risk
B. Basic risk, yield curve risk, option risk and Repricing risk
C. Repricing risk option risk, yield curve risk, and basic risk
D. Basic risk, yield curve risk, option risk and repurchasing risk

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 258
In a price risk situation if customers withdraw their applications a bank may be unable to originate enough loans to meet its forward sales commitments .Because of
this kind of “Fallout” a bank may have to purchase additional loans in the secondary market at prices higher than anticipated. Alternatively, a bank may choose to
liquidate its commitment to sell and deliver mortgages by paying a fee to the counterparty commonly called a ______________.

A. Settlement
B. Pair-off arrangement
C. End of loan settlement
D. None of these

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 259
Compliance risk can lead t[o all of the following situations EXCEPT:

A. Diminished reputation
B. Reduced franchise value
C. limited business opportunities

https://www.gratisexam.com/
D. None of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 260
Selectively increasing the price of a mortgages loan above the bank’s established rate to certain customers (“overages”) may have the effect of discriminating
against those customers .This practice left undetected and not properly controlled may raise the possibility of:

A. Reputation risk
B. Price risk
C. litigation or regulatory action (compliance Risk)
D. Strategic Risk

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 261
Strategic Risk if not properly controlled, understood or measured may result in:

A. High Earnings volatility

B. Significant capital pressures
C. Withdrawal of loan portfolios by the customers
D. Only A&B

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 262
To limit strategic risk management should ensure proper balance between the:

A. Mortgage company’s willingness to accept risk and its supporting resources and control
B. Internal operations and possibility of litigation
C. Managerial capacities and capabilities and delivery networks
D. All of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 263
In order to avoid reputation risk; e.g. a bank that originates and sells loans into the secondary market should follow ______________ to protect its reputation in the
market to support future loan sales.

A. Proper communication channels

B. Effective underwriting and documentation standards
C. Regulatory requirements
D. Disclosure requirements

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 264
When a bank charges off a loan as a loss, it reduces an account called the”_____________”

A. Lease payable
B. Lease Expense
C. Allowance of loans and lease losses
D. Prepaid loans and lease

https://www.gratisexam.com/
Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 265
Under the principles of bank accounting, loans reported as non-performing have not yet been charged off as _____________.

A. Income
B. Expense
C. Losses
D. prepaid

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 266
Hospitals document reserves as that portion of the accounts receivables that they hope to collect but have some doubt about its collectability. Rather than book
these amounts as income, hospitals will “____________” These amounts until paid.

A. Bad debts
B. Reserve
C. Income expense
D. All (Allowance for loans and lease losses)

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 267
To the extent that the hedged relationship ceases to be effective, the hedging instrument’s gains/losses should be transferred from the reserve and recognized in:

A. Assets
B. Receivables
C. Income
D. Expense

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 268
The process of purchasing all or any part of anew issue of municipal securities form the issuer and offering such securities for sale to investors is called:

A. Underwriting
B. Asset revaluation reserve
C. Hedging
D. None of These

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 269
For refinancing home and mortgage loans for example, the underwriter may request additional documentation such as:

A. Savings/source of money for down payment

B. Appraisal
C. Credit History
D. Only A&B

https://www.gratisexam.com/
Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 270
Once the underwriter has reviewed all of the file documentation provided, he or she will be issued a written decision .The decision may be one of the following:

A. Approved
B. Suspended
C. Denied
D. Any one of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 271
“A negotiated offering in which a new issue of municipal securities is sold on an agency basis by a placement agent directly to institutional or private investors rather
than through an offering to the general investing public” is referred as:

A. Public offering
B. Private placement
C. over the counter trade
D. None of these

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 272

https://www.gratisexam.com/
Regulation D, an SEC rule governing the limited offer and sale of securities without registration under the securities Act of 1933, regulates private placement
exemptions. Regulation D supports all of the following EXCEPT:

A. Allows for the issuance and sale of securities to purchasers, if they qualify as accredited investors
B. Offerings are advantageous to any private company or entrepreneur because they allow an entity to obtain funding faster and to avoid the costs associated with
a public offering
C. Allows usually smaller companies to raise capital through the sale of equity or debt securities without having to register their securities with SEC.
D. None of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 273
Underwriting decisions are more influenced by what underwriters think they can sell to the public than _____________.

A. Quality of the company

B. Judgment in picking the IPO
C. Estimated profit/gains
D. Both A&C

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 274
Recent turmoil in the financial markets illustrate the volatility of the secondary market for subprime loans and the significant liquidity risk incurred when originating a
large volume of loans intended for:

A. IPO
B. Securitization and sale
C. Loans
D. All of these

https://www.gratisexam.com/
Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 275
IF a securitization transaction meets FAS 125 sale or servicing criteria, the seller must recognize any gain or loss on the sale of the pool immediately and carry any
retained interests in the assets sold ( including servicing rights/obligation and interest-only strips) at ____________.

A. Principal value
B. Fair value
C. Premium Amount
D. Both A&C

Correct Answer: B
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 276
______________ includes provision provided by issuers to reduce risk in CMBS in a securitized process.

A. Structuring
B. Underwriting
C. Credit Enhancement
D. Collateral pool

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

https://www.gratisexam.com/
QUESTION 277
A special servicer is the servicer who assumes servicing responsibilities when a loan goes into default and conducts the work-out “or foreclosure process. There are
various scenarios typical for determining special servicers; as mentioned below, EXCEPT:

A. Those seller/issuers retaining the first-loss piece

B. Those investing in “B” pieces in return for special services rights.
C. Those appointed solely because of risk-management expertise.
D. None of these

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 278
Most certificates are held by the depository trust company as custodians for the trustee for the benefit of the certificate holders, and the notice of book entry is made
to the certificate holders simultaneously with the distribution. The actual certificates, but instead only possess a record of ___________.

A. Where they are?

B. What they have?
C. When they purchased?
D. All of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 279
Which of the following should be the next step after the structuring process in order to complete the securitization process?

https://www.gratisexam.com/
A. Credit management
B. Credit operations
C. Credit Enhancement
D. Credit deployment

Correct Answer: C
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 280
Some organizations will strive to simply with the law; others will use the Act as an opportunity to further promote treasury best practices. Specific areas of
opportunity include all of the following EXCEPT:

https://www.gratisexam.com/
A. Identifying control points/issues and improving control processes
B. Improving financial reporting and support processes
C. Strengthening global governance activities
D. None of these

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 281
Initially, back-office operation were created as captives of parent companies and treated as cost centers from cost centers to profit centers due to:

A. The emergence of third-party back-office facilities making it possible for corporation to avail of their services
B. Corporation are increasingly converting captive back-office operations into profit centers by accepting external clients
C. Stagnant position of service activities being outsourced.
D. Both A&B

Correct Answer: D
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 282
Back-office operations are _____________ as offshore operations which establish business entities in tax-free export zones or offshore centers.

A. Almost same
B. Same
C. Not the same
D. None of these

Correct Answer: C
Section: Volume C
Explanation

https://www.gratisexam.com/
Explanation/Reference:

QUESTION 283
I- Loan Processing
II- Claims Processing
III- Applicating
IV- Credit and Collection
V- Reconciliations
VI- Account Payments
VIII- Time and Expense Reimbursement
IX- Vendor Payments
X- Payroll

These all are the services included in:

A. Back office operations

B. Offshore Operations
C. Tax-free export zones
D. None of these

Correct Answer: A
Section: Volume C
Explanation

Explanation/Reference:

QUESTION 284
Agents that represent one company exclusively are called:

A. Independent Agents
B. Captive Agents
C. Exclusive Agents
D. Detached Agents

Correct Answer: BC
Section: Volume C
Explanation

https://www.gratisexam.com/
Explanation/Reference:

https://www.gratisexam.com/

https://www.gratisexam.com/