7) The principal-agent problem that exists for bank trading activities can be reduced throughA) creation of internal controls that combine trading activities with bookkeeping.B) creation of internal controls that separate trading activities from bookkeeping.C) elimination of regulation of banking.D) elimination of internal controls.

The principal-agent problem is a common issue in various industries, including banking, where…

Answered: 7) The principal-agent problem that…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Do you think it is possible for depositors to discipline bank managers who are tempted to take unsound risks with their funds? What steps are necessary for depositors to do this successfully
Bank reconciliation is best prepared by the Accountant rather than the Internal Auditor. * TRUE FALSE
Part II Preparing the bank reconciliation is considered to be an important step in the internal control process for cash. It is because the cash balances in the depositor's accounting records and its bank statement usually do not agree. Explain the causes of discrepancies for this situation with a specific example for each cause.
Which one of the following statements is true of E-commerce? a.It involves the exchange of an electronic item for cash. b.Banks are reducing their use of e-commerce platforms because of cyber attacks. c.Includes trading and transferring of funds by using computer networks. d.E-commerce is not as secure as traditional delivery channels.
1. Bank regulation based on private purchases and sales of banks’ risk is known as: a) liquidity risk regulationb) credit risk regulationc) market-based risk regulation d) systemic risk regulation
Explain briefly what are the different types of operational risks affecting the banking institutions? Explain the Operational Risk Management (ORM) process and critically evaluate how ORM process would support to improve the operational risk management process of a bank?
Two types of financial risks faced by banks operating in the Financial sector and state how a risk management tool can be used to mitigate suck risk
QUESTION 3 A bank reconciliation should be prepared periodically because a. the company's records and the bank's records are in agreement b. the bank has not recorded all of its transactions c. the bank must make sure that its records are correct d. any differences between the company's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected
Bank regulation cannot eliminate risk and does not prevent bank failure. It cannot guarantee that bank management will make good decisions especially in high-risk lending and investment. However, bank regulation can enhance safety and stability of the banking industry. Therefore bank regulation is justified. Do you agree or disagree? Please explain your answer.
Select all that are true regarding business operations risk for a bank. In recent years the need for physical security of the bank's premises has become more important than the bank's cybersecurity of their online operations. The cost of the bank meeting regulatory compliance requirements is minimal for most institutions and has no net effect on this risk. Uncertainty in new or updated banking regulations is a part of this risk. The increased regulation of banks reduces the risk in this category. This risk can be measured by variance to budgeted financial results, which is heavily influenced by interest rates and management strategy. This risk is impacted by the risk management strategies and procedures undertaken by the bank.
The company is not preparing bank accounts reconciliations. This is an example of: * O Audit risk O Control risk Detection Risk Inherent risk
Which of the following factors creates an opportunity for fraud to be committed in an organization? a. Management demands financial success. b. Poor internal control. c. Commitments tied to debt covenants. d. Management is aggressive in its application of accounting rules.

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