CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

A central bank fines a commercial bank for not following statutory regulations with regard to making specific non-performing loan provisions on three loans. Mark Keaton, CFA, sits on the Board of Directors of the commercial bank as a non-executive director, representing minority shareholders. He also chairs the internal audit committee that determines the provisioning policy of the bank. Julie Boadway, CFA, is the bank's external auditor and follows international auditing standards whereby she tests the loan portfolio by randomly selecting loans to check for compliance in all aspects of central bank regulations. Which Charterholder is most likely in violation of the Code and Standard?
A. Both
B. Keaton
C. Boadway
Explanation: Keaton sat on the audit committee that determined the bank's provisioning policies, which were contrary to the statutory regulations of the central bank. As a result he most likely violated Standard I Professionalism by not abiding by the regulations of a regulatory body. Boadway did not violate Standard I Professionalism, as it is not apparent that she knowingly facilitated the incorrect provisioning policy or even followed it. Auditors, in the course of their audits, sample files. As a result, it is possible that Boadway did not even come across the files that were treated in a manner contrary to the central bank regulations.

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