CS Professional · Internal and Forensic Audit · Special Points relating to Internal Audit in various Entities
An internal auditor is reviewing premium collection at Navjeevan Insurance Ltd, which collects premiums through agents and also via online payment. Which procedure best tests the risk that agents are retaining premiums received in cash?
The best procedure is to compare the date premium was received from the customer with the date it was deposited and the policy credited, supported by confirmations from sampled policyholders. This directly detects agents retaining cash. Commission rate checks and solvency computations address other risks.
- ACompare the date of agent's receipt on customer-acknowledgement records with the date the premium was deposited and the policy credited, and follow up with confirmations from a sample of policyholdersCorrect
- BReview only the total premium income in the annual report
- CCheck that agents' commission rates match the approved schedule
- DVerify the solvency margin computation
Explanation
Misappropriation of premium by agents shows up as delay or non-deposit between collection and credit. Matching customer acknowledgements to deposit and policy records, supported by policyholder confirmations, tests this directly. Commission rate checks and solvency computation address different risks.
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