Consider Going Concern :
In obtaining an understanding of the bank, the auditor should consider whether there are events and conditions which may cast significant doubt on the bank’s ability to continue as a going concern. The auditor needs to consider events and conditions relating to the going concern assumption when performing risk assessment procedures so as to make timely discussions with the management, review the management’s plans, and resolution of any identified going concern issues. Audit procedures, which may indicate that there could be a question about a bank’s ability to continue as a going concern for the foreseeable future as mentioned in paragraph A15 of SA 570, Going Concern.
There are certain specific events or conditions, which could specifically cast a significant doubt on the ability of the bank to continue as a going concern:
Rapid increase in the volume of derivative business without necessary controls being in place.
Decline in the projected profitability, if the bank is at or near its minimum level of regulatory capital.
Higher interest rates being paid on deposits and borrowing than the market rates.
Actions taken or threatened by regulators that may have an adverse effect on the ability of the bank to continue as a going concern.
High concentration of exposure to certain borrowers or industries.
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