Above is part of the audit report taken from the annual report of Bahrain Middle East Bank for the year 2020

Requirement:

1. What is the type of report?

2. Why does an auditor issue this type of report for the zain Bahrain?

3. In general, when an auditor can issue this type of report?

We do not express an opinion on the accompanying consolidated financial statements. Because of the significance of the matters described in the Basis for disclaimer of opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence with respect to the basis of going concern adopted by the Bank; to provide a basis for an audit opinion on the consolidated financial statements. Basis for disclaimer opinion We draw your attention to Note 2 of the consolidated financial statements. As stated therein, the Bank incurred a loss of US$ 3.9 million for the year ended 31 December 2019, and as of that date, the Bank has accumulated losses of US$ 216.6 million and the Bank's total liabilities exceeded its total assets by US$ 116.6 million. The Bank's total liabilities amounting to US$ 137.2 million as of 31 December 2019 include a deposit of US$ 127.6 million from a single financial institution that rolls over on a monthly basis. The Bank's ability to repay its liabilities is largely dependent on the recoverability of non-performing exposures of US$ 194.8 million from related parties which were fully provided for as at 31 December 2019. As of the date of our report, the Bank is working on various options, including negotiating with the related parties to restructure the exposures, and other alternative options, with the objective of recovering these exposures. These consolidated financial statements have been prepared on a going concern basis. We draw your attention to Note 3 of the consolidated financial statements. As stated therein, the Bank's total equity as of 31 December 2019 is negative US$ 116.6 million which is less than the minimum of US$ 100 million required by Central Bank of Bahrain ("CBB") for wholesale bank licensees. Further, the capital adequacy stands below the minimum requirement of 12.5% and accordingly, the Bank is not in compliance with the minimum capital adequacy requirements set out in regulations issued by the CBB. Further, as of 31 December 2019, the Bank's accumulated losses are more than 50% of its paid-up capital. As required by the Bahrain Commercial Companies Law (BCCL), the Bank should convene a shareholder's meeting to decide whether to continue the operations of the Bank. These events and conditions, along with other matters as set forth in Note 3, indicate that a material uncertainty exists that may cast doubt on the Bank's ability to continue as a going concern