An Internal Auditor Has Taken an Attributes Sample of a Bank's

question 358

Multiple Choice

An internal auditor has taken an attributes sample of a bank's existing loan portfolio. Out of a sample of 60 loans, the auditor found: Four that were not properly collateralized. Five that were not in compliance with bank policies (other than lack of collateralization) . Four that were part of a related-party group, but were set up as separate loan entities. Of the 60 loans selected in the sample, these errors were noted on a total of 10 loans. Several loans had multiple problems. Which of the following conclusions can the auditor reach from these observations? 1. There is sufficient evidence that fraudulent activity is taking place by one or more of the bank's lending officers. 2. The financial statements will be misstated as a result of these actions. 3. There are significant noncompliance audit findings that should be reported.

• A) 3 only
• B) 1 and 2 only
• C) 1 and 3 only
• D) 2 and 3 only

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Definitions:

Noncompensatory Model

A decision-making approach where no trade-offs are allowed; that is, a poor score in one criterion cannot be offset by a high score in another.

Algorithm

A step-by-step procedure or set of rules designed to solve a problem or perform a specific task.

Heuristic

A problem-solving approach that employs a practical method or various shortcuts to produce solutions that are not guaranteed to be optimal, but sufficient for the immediate goals.

Information Retrieval

The process of obtaining relevant information from a collection of resources in response to a specific query or need.