CAIIB · Advanced Bank Management · Module D — Compliance in Banks and Corporate Governance
CAIIB ABM Unit 27 — Compliance Audit: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper I of the December 2026 cycle (Sunday 6 December 2026)
This is the free practice page for CAIIB ABM Unit 27 — Compliance Audit (Module D — Compliance in Banks and Corporate Governance). The CAIIB Mock Centre holds 113 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
ABM · Module D113 MCQs in the Mock Centre5 free belowPaper on 6 December
Key facts examiners test from this unit
Disclosure, market discipline and risk-based internal audit — disclosure feeds market discipline and protects depositors; risk-based internal audit checks how management manages risk, as the third line of defence.
Governing the internal audit function — an independent, permanent internal audit covering every activity, overseen by the ACB and led by a senior HIA with no business targets.
Compliance reporting and RBI's disclosure directions — breaches flow from branches to the compliance department and are test-checked by risk sample; RBI's directions set the rules on CFS, blocked accounts, reserves and provisions.
Changed since the textbook
Expected credit loss directions for banks (27 April 2026). RBI issued final directions moving banks to expected credit loss provisioning from 1 April 2027. Loans fall into three stages; a loan more than 30 days past due is presumed to have a significant rise in credit risk (Stage 2), and the 90-day NPA norm continues as the backstop for Stage 3. The first-day impact may be spread over four years. Source: RBI final ECL directions (summary by Sansa Legal)
Financial statement rules consolidated into RBI's 2025 directions (28 November 2025). As part of its consolidation of regulatory instructions, RBI issued the Reserve Bank of India (Commercial Banks – Financial Statements: Presentation and Disclosures) Directions, 2025, which now carry the rules of the Master Direction of 30 August 2021 described in the textbook (consolidated statements, blocked accounts, statutory reserve, share premium, fraud provisioning and disclosures). Source: RBI Master Directions
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 113 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
Before the Banking Regulation Act, under which part of the Indian Companies Act were banking companies governed?
Why (c): Provisions on banking companies were administered through Part XA of the Indian Companies Act (SJA: the 1913 Act, as amended in 1936). (a) is wrong: Part XA is the correct part. (b) is wrong: Part XA is the correct part. (d) is wrong: The schedule on accounts was not the banking part.
Question 2 of 5
In giving assurance over fraud risk, what is a bank's internal audit expected to do?
Why (b): Internal audit gives assurance by assessing the design and operation of anti-fraud controls, with fraud risk built into the audit plan and each assignment. Investigating individual frauds and fixing staff accountability are tasks for management and vigilance; internal auditors investigate only if they have the expertise. (a) is wrong: Investigation and accountability are management and vigilance tasks. (c) is wrong: Audit must assess anti-fraud controls, not leave them to vigilance. (d) is wrong: Fraud risk is part of each assignment, not a yearly review.
Question 3 of 5
Under RBI's directions, which commercial banks need not prepare consolidated financial statements?
Why (c): Commercial banks other than RRBs and LABs, listed or unlisted, prepare and disclose CFS. (a) is wrong: PSBs must prepare CFS. (b) is wrong: Listed banks must prepare CFS. (d) is wrong: They are not exempted on that ground.
Question 4 of 5
How is an RRB treated in its sponsor bank's consolidated financial statements?
Why (d): RBI's directions say an RRB shall be treated as an associate in the CFS of its sponsor bank. (a) is wrong: It is included as an associate. (b) is wrong: It is not treated as a subsidiary. (c) is wrong: It is not a joint venture.
Question 5 of 5
For which of these board proposals does Regulation 29 require prior intimation?
Why (b): Prior intimation covers financial results, buyback, voluntary delisting, fund raising and dividends or convertible securities. (a) is wrong: Staff postings are not listed. (c) is wrong: ATMs are operational matters. (d) is wrong: It is not a board proposal of this kind.
0 of 5 answered.
Traps in this unit
RBIA does not "audit risks".
Compliance is the second line, not the third.
The Board's chair cannot chair the ACB.
Practise all 113 questions on Unit 27. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the ABM Online Mock Centre unlocks all 4,600+ ABM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.