MCQs on Audit & Assurance (Part-21) (801 to 856)

 801. Asset in respect of which loss has been identified by the bank or internal auditor/external auditor or the RBI inspection, but the amount has not been written off, wholly or partly, is classifies as

a) Substandard Asset

b) Doubtful Asset

c) Written off Asset

d) Loss Asset

802. Which of the following is not classified as NPA

a) Impaired

b) Sub-standard

c) Doubtful

d) Loss

803. Erosion in the value of security can be reckoned as significant when the realizable value of the security is less than ________% of the value assessed by the bank or accepted by RBI at the time of last inspection, as the case may be

a) 20

b) 50

c) 60

d) 75

804. In case of classification of advance as standard assets, provision is required by the bank

a) .40%

b) .50%

c) .75%

d) .80%

805. In case of classification of commercial real estate advance, as standard assets provision is required by the bank

a) .40%

b) .50%

c) .75%

d) 1.00%

806. In case of classification of advance as sub-standard assets, provision is required by the bank for secured portion

a) 10%

b) 15%

c) 20%

d) 25%

807. In case of classification of advance as sub-standard assets, provision is required by the bank for unsecured portion

a) 10%

b) 15%

c) 20%

d) 25%

808. In case of classification of advance as doubtful assets, provision is required by the bank for unsecured portion

a) 100%

b) 75%

c) 60%

d) 50%

809. In case of classification of advance as doubtful assets (up to one year), provision is required by the bank for secured portion

a) 10%

b) 25%

c) 40%

d) 100%

810. In case of classification of advance as doubtful assets (more than one year but up to 3 year), provision is required by the bank for secured portion

a) 10%

b) 25%

c) 40%

d) 100%

811. In case of classification of advance as doubtful assets (more than 3 years), provision is required by the bank for secured portion

a) 10%

b) 25%

c) 40%

d) 100%

812. In case of classification of advance as loss assets, provision is required by the bank

a) 100%

b) 75%

c) 60%

d) 50%

813. _______________ refers to the security offered by the borrower for bank finance or the one against which credit has been extended by the bank.

a) Primary Security

b) Collateral Security

c) Healthy Security

d) None of these

814. _________________ is an additional security. Security can be in any form i.e. tangible or intangible asset, movable or immovable asset

a) Primary Security

b) Collateral Security

c) Healthy Security

d) None of these

815. Most common types of securities accepted by banks are the following

a) Personal Security of Guarantor

b) Immovable Property

c) Life Insurance Policies

d) All of these

816. Which of the following is not a type of mortgage

a) Registered Mortgage

b) Equitable Mortgage

c) Both (a) and (b)

d) None of these

817. _________________ can be effected by a registered instrument called the “Mortgage Deed” signed by the mortgagor.

a) Registered Mortgage

b) Equitable Mortgage

c) Both (a) and (b)

d) None of these

818. __________________ is effected by a mere delivery of title deeds or other documents of title with intent to create security thereof

a) Registered Mortgage

b) Equitable Mortgage

c) Both (a) and (b)

d) None of these

819. _______________ involves bailment or delivery of goods by the borrower to the lending bank, with the intention of creating a charge thereon as security for the advance

a) Mortgage

b) Pledge

c) Hypothecation

d) Assignment

820. ________________ is the creation of an equitable charge, which is created in favour of the lending bank by execution of agreement in respect of movable securities belonging to the borrower

a) Mortgage

b) Pledge

c) Hypothecation

d) Assignment

821. ______________ is a transfer of an existing or future debt, right or property belonging to a person in favour of another person.

a) Mortgage

b) Pledge

c) Hypothecation

d) Assignment

822. ____________ is a statutory right of a creditor to adjust, wholly or partly, the debit balance in the debtor’s account against any credit balance lying in another account of the debtor.

a) Adjustment

b) Agreement

c) Set-off

d) Deduction

823. ___________ is creation of legal charge with consent of the owner, which gives lender a legal right to seize and dispose /liquidate the asset under lease.

a) Set-off

b) Lien

c) Disposal

d) Release

824. An advance will be classified as NPA, if

a) It ceases to generate income for a bank

b) Interest and/or installment of principal in respect of such an advance have been remain overdue or out of order for a specified period of time (exceeding 90 days as on balance sheet date)

c) (a) or (b)

d) None of these

825. An account should be treated as ‘Out-of-Order’ if

a) Outstanding balance remains continuously in excess of the sanctioned limit/drawing power

b) There are no credits continuously for 90 days as on the balance sheet date or the credits are not enough to cover the interest debited during the same period

c) (a) or (b)

d) None of these

826. Where it appears that an account has inherent weakness and few credits near balance sheet tries to make it regular, the account should be classified as _________

a) Standard Asset

b) Non-Performing Asset

c) Loss Asset

d) None of these

827. Which of the following statement is incorrect w.r.t classification of advance as NPA

a) All the facilities granted by bank to borrower will have to be treated as NPA and not the particular facility or part thereof.

b) In case of consortium advance, asset classification should be based on the record of recovery of individual member of banks.

c) In case of advance with moratorium period for payment of interest, payment of interest becomes due only after the expiry of moratorium period, therefore such interests do not become overdue and hence do not become NPA with reference to date of debit of interest.

d) The credit facilities backed by State Government though overdue, will be classified as NPA only when the State Government repudiates its guarantee when invoked.

828. The credit facilities backed by__________though overdue, will be classified as NPA only when the ___________ repudiates its guarantee when invoked

a) Central Government

b) State Government

c) RBI

d) Any Guarantor

829. Loan granted for short duration crop shall be classified as NPA if interest and/or instalments of principal is overdue for

a) One crop season

b) Two crop season

c) Exceeding 90 days

d) Exceeding 120 days

830. Loan granted for long duration crop shall be classified as NPA if interest and/or instalments of principal is overdue for

a) One crop season

b) Two crop season

c) Exceeding 90 days

d) Exceeding 120 days

831. Credit card account shall be classified as NPA, if ___________ amount due, as mentioned in the credit card statement is not paid fully within ___________ days from next statement date

a) Total, 90

b) Minimum, 30

c) Minimum, 90

d) None of these

832. Which of the following is not exception to norms for classification of assets as NPA

a) Temporary Deficiencies

b) Natural Calamities w.r.t. short term agricultural advance

c) Advances against Term Deposits, NSC, KVP, IVP

d) Facilities Backed by State Government

833. Banks should recognize income from NPA

a) On cash basis

b) On accrual basis

c) As the policy of the Bank

d) Substandard assets on accrual basis, and other NPAs on cash basis.

834. Interest income from advances though overdue but not classifies as NPA as secured against Term Deposits, NSC, KVP, IVP may be recognize

a) On cash basis

b) On accrual basis

c) Substandard assets on accrual basis, and other NPAs on cash basis.

d) On Secured portion accrual basis and on secured portion on cash basis.

835. Interest income from advances though overdue but not classifies as NPA as secured against guarantee of the Central Government, recognized as

a) On cash basis

b) On accrual basis

c) Substandard assets on accrual basis, and other NPAs on cash basis

d) On Secured portion accrual basis and on secured portion on cash basis

836. The auditor can obtain sufficient appropriate audit evidence about advances by study and evaluation of the internal controls relating to advances, and by:

a) Examining loan documents

b) Examining the existence, enforceability and valuation of the security

c) Checking compliance with RBI norms including classification and provisioning

d) All of the above

837. If a loan/advance is treated as NPA for the first time, interest accrued which had not been realized but credited to the income account should be reversed by transfer to a separate account called ___________

a) Suspense Account

b) Income Reversal Account

c) Interest Suspense Account

d) Account Suspense

838. In carrying out audit of advance, the auditor is primarily concerned with obtaining evidence about the following

a) Amounts included in balance sheet in respect of advances are outstanding at the date of the balance sheet

b) Advances represents amount due to bank

c) There are no unrecorded advances

d) All of the above

839. _____________ basically refers to a business environment where the processes, operations, accounting and even decisions are carried by using computer system.

a) Automated environment

b) Computer environment

c) IT environment

d) None of these

840. Some of the key features of an automated environment are

a) Enables faster business operations

b) Better security and controls

c) Provide latest information

d) All of above

841. Which of the following is not IT related risk

a) Unauthorized access to data

b) Unauthorized changes to system of program

c) Sampling Risk

d) Lack of adequate segregation of duties

842. Types of Controls in an Automated Environment

a) General IT Controls

b) Application Controls

c) IT Dependent Manual Controls

d) All of above

843. __________________ are policies and procedures that relates to many applications and support the effective functioning application controls

a) General IT Controls

b) IT Dependent Manual Controls

c) Both (a) and (b)

d) None of these

844. Which of the following the auditor should consider to obtain an understanding of the company’s automated environment

a) Information system being used

b) Key Persons

c) Outsourced activities

d) All of the above

845. General IT Controls that maintain integrity of information and security of data commonly include controls over following

a) Inputs

b) Access Security

c) Processing

d) Output

846. Which of the following is not method for testing of controls in automated environment

a) Inspect the configuration defined in an application

b) Inspect technical manual/user manual of system and application

c) Analytical Review

d) Observe how a user processes transactions under different scenarios.

847. Which of the following is an automated control?

a) Program change

b) System generated report

c) Application control

d) Configuration

848. General IT control that ensure backups, performance monitoring, recovery from failures commonly include controls over

a) Program Change

b) Access Security

c) Data Center and Network Operations

d) Application System acquisition, development and maintenance

849. The objective of which of the following is to ensure that modified system continue to meet financial reporting objectives

a) Data Center and Network Operation

b) Program Change

c) Access Security

d) Application system, acquisition, development and maintenance

850. The objective of which of the following is to ensure that access to programs and data is authenticated and authorized to meet financial reporting objectives

a) Data Center and Network Operations

b) Program Change

c) Access Security

d) Application system, acquisition, development and maintenance

851. The objectives of which of the following is to ensure that system are developed, configured and implemented to meet financial reporting objectives

a) Data Center and Network Operations

b) Program Change

c) Access Security

d) Application system, acquisition, development and maintenance.

852. The combination of processes, tools and techniques that are used to tap vast amounts of electronic data to obtain meaningful information is called_________

a) Data Analytics

b) Data base

c) Information system

d) None of these

853. Edit checks and validation of input data, sequence number checks, user limit checks, reasonableness checks, mandatory data fields, these are examples of

a) General IT Control

b) Manual Application Controls

c) Automated Application Controls

d) None of these

854. IT dependent controls are basically__________

a) Manual Control

b) Automated Control

c) Both (a) and (b)

d) None of these

855. Which of the following is General IT control?

a) IT Environment

b) Application Control

c) Access Security

d) IT Department Control

856. _________________ can be used in testing of electronic records and data residing in IT systems using spreadsheets and specialized audit tools to perform fraud investigation analysis of journal entries as required by SA 240 and selection of audit sample.

a) Data base

b) Data analytics

c) Information system

d) None of these

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