FRM Part II · FRM Exam Part II · Risk Reporting
A bank's internal audit reviews its BCBS 239 compliance. It notes: (1) reports reconcile to the general ledger, (2) the bank uses extensive manual workarounds with limited documentation, (3) senior management has approved a remediation plan, (4) the board receives reports only on credit risk. Which finding most directly shows a weakness in the accuracy and integrity principle?
Extensive undocumented manual workarounds indicate an accuracy and integrity weakness. BCBS 239 favours largely automated aggregation to limit errors, and requires manual processes to carry equivalent controls and documentation. Reconciliation to the ledger is a strength, while credit-only board reporting is a comprehensiveness issue.
- AReports reconcile to the general ledger
- BExtensive undocumented manual workaroundsCorrect
- CSenior management approved a remediation plan
- DBoard receives only credit risk reports
Explanation
BCBS 239 says that data should be aggregated largely in an automated way to minimise error, and that manual processes should have equivalent controls and be documented. Undocumented manual workarounds raise error risk and hurt integrity. Reconciliation is a strength, the remediation plan relates to governance, and credit-only reporting concerns comprehensiveness.
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