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IAI Actuarial Core Principles · Business Management · Professionalism and ethics case studies

Kavita Rao, a Fellow actuary, prepared a valuation report for a client, Sundaram Mutual Fund Trust, and later discovers a spreadsheet error that understates liabilities by a material amount. The report has been circulated and a decision based on it is due in a week. Which action best reflects professional standards?

She should promptly tell the client about the material error, issue a corrected report and explain how the conclusions change. Because a decision is imminent and relies on the flawed figures, delay or silent correction would leave the client misled, which breaches integrity and the duty to communicate clearly.

  1. AWait until the decision is made, then mention the correction in next year's report
  2. BCorrect the error quietly in her files and keep the circulated report unchanged
  3. CPromptly inform the client of the error, provide a corrected report, and explain the effect on the conclusionsCorrect
  4. DAsk a colleague to confirm the error first and take no action if the colleague is unsure
  5. Inform only the regulator, since the client may react badly

Explanation

Integrity and the duty to avoid misleading users require prompt correction of a material error to the client who relies on the work. Delay, silent correction or telling only the regulator leaves the client's decision based on faulty figures. A colleague's doubt does not remove the need to investigate and communicate.

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