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Answer: Confirming that the employees conducting stress tests are qualified
**Correct Answer: D** **Explanation:** - **D is correct.** The internal audit function should ensure that stress tests are carried out by employees with appropriate qualifications. (p. 106) - **A is incorrect.** The board of directors should determine procedures used to create scenarios. - **B is incorrect.** The internal audit function's role with respect to stress testing models is to ensure that they are independently validated. - **C is incorrect.** The internal audit function's role is to ensure that the documentation produced by those conducting the stress test is satisfactory.
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The board of directors of a regional bank is examining ways of improving the stress testing governance structure of the bank following large losses incurred during a recent period of financial market turmoil. The board discusses the appropriate responsibilities of various functions within the bank that are related to stress testing. According to best practice, which of the following correctly describes a role of the internal audit function in stress testing governance?
A
Developing procedures for generating stress test scenarios
B
Building models for use in stress testing
C
Documenting the results of stress tests
D
Confirming that the employees conducting stress tests are qualified
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