Banking Risks and Types

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What considerations should an auditor make before using the work of another auditor?

Financial stability and reputation of the other auditors

Independence and competence of the other auditors (correct)

Familiarity with the bank's clients by the other auditors

Number of audits conducted by the other auditors

Which phase of the audit process may be helpful in identifying related party transactions?

Reporting phase

Planning phase (correct)

Review phase

Execution phase

According to PSA 570, what does the auditor consider regarding the bank's ability to continue as a going concern?

Materiality of transactions

Events or conditions that may cast significant doubt (correct)

Past audit findings

Frequency of financial reporting

What event could indicate significant doubt on a bank's ability to continue as a going concern?

Increased amounts due to central banks Signup and view all the answers

In the context of external auditors, what is a key aspect related to accreditation?

Total assets criteria for external auditors Signup and view all the answers

When considering the work of another auditor, what evidence should the auditor obtain about the adequacy of that work?

Sufficient appropriate audit evidence that the work done by the other auditor is adequate Signup and view all the answers

What is necessary for a bank to have in order to reduce inherent and control risks to levels less than high?

A robust system of internal control Signup and view all the answers

Why might relatively small misstatements have a significant impact on banks with high leverage?

Due to the effect on capital and financial results Signup and view all the answers

What factor might call into question the appropriateness of management's use of the going concern assumption in a bank?

Breach of regulatory capital requirements Signup and view all the answers

Why is it often necessary for auditors to use the work of other auditors in different locations where a bank operates?

Wide geographic dispersion of bank offices Signup and view all the answers

What consideration guides an auditor in assessing materiality for a bank audit, especially with high leverage?

$\text{Effect on capital and financial results}$ Signup and view all the answers

Why do relatively small misstatements in a bank become significant despite their size?

$\text{Impact on capital and period results}$ Signup and view all the answers

What is solvency risk in banking?

The risk of loss arising from the bank not having sufficient funds to meet its obligations. Signup and view all the answers

What is transfer risk in banking?

The risk of loss arising from a counterparty's obligation not being denominated in their home currency. Signup and view all the answers

What is a common risk banks may face regarding ownership?

Influence from owners affecting the allocation of credit. Signup and view all the answers

What are examples of fraudulent activities that may occur within a bank?

Misappropriation of assets for personal gain without knowledge or complicity of employees. Signup and view all the answers

How does closely held ownership in banks affect management?

Owners may significantly influence management, affecting independence and judgment. Signup and view all the answers

Which type of risk involves a counterparty's obligation not being in their home currency?

Transfer risk Signup and view all the answers