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      Question

      In an internal audit of a bank, frequent manual

      overrides in the loan appraisal system were observed. What audit risk does this represent?
      A External fraud Correct Answer Incorrect Answer
      B Inherent risk Correct Answer Incorrect Answer
      C Control risk Correct Answer Incorrect Answer
      D Liquidity risk Correct Answer Incorrect Answer
      E Operational efficiency Correct Answer Incorrect Answer

      Solution

      Control risk arises when internal controls fail to detect or prevent misstatements. Manual overrides indicate weak control systems that could result in loan errors or fraud.

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