Exception Reports Generated by the Lending Institution Are Designed to Identify

question 353

Multiple Choice

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

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Definitions:

Illusory Correlation

The tendency to overestimate the link between variables that are related only slightly or not at all.

Hot Hand Player

The belief or phenomenon where a person is perceived to be more likely to succeed in a task (e.g., scoring in sports) because of previous consecutive successes, despite statistical evidence often suggesting randomness.

Coin Flip

A method of making a binary decision or selecting randomly between two options using the outcome of a tossed coin.

Base Rate Fallacy

A cognitive error where individuals ignore general statistical information (base rates) in favor of specific anecdotal information.