Practice Test 3

You are the auditor of a nonissuer in a financial statement audit of a community bank with significant allowance for credit losses (ACL). Loan officers input risk ratings, a credit committee approves exceptions, and the ACL model is run by finance with manual overlays. You observe undocumented overrides to risk ratings and limited review of model assumptions. What is the primary business process impacting financial reporting risk?

You are performing a nonissuer financial statement audit of a company with significant manual journal entries at period end. Department controllers submit entries via email, and the corporate controller posts entries without documented review of support or segregation of duties. You observe several late entries posted after the close checklist is completed. Which business process documentation is most critical for risk assessment?