IAI Actuarial Core Principles · Business Management · Professionalism and ethics case studies
Meera, an appointed actuary, finds that a reserving report she delivered last month has an error in a lapse assumption. Correcting it would increase reserves modestly. The management asks her not to tell the board until the next quarterly meeting. What is the most appropriate course?
Meera should promptly tell the board and other relevant users about the error and its impact, and issue a corrected report. Professional integrity requires timely, open disclosure of errors in work that others rely on, regardless of management's wish to delay or the modest size of the change.
- AWait until the next quarterly meeting, since the amount is modest and management has asked for this
- BCorrect the error silently in the next report without mentioning the earlier one
- CPromptly inform the relevant parties, including the board, of the error and its effect, and issue a corrected reportCorrect
- DInform only the regulator and keep the board uninformed
- Withdraw from the engagement without telling anyone why
Explanation
An actuary who finds a material error in work already relied upon must disclose it promptly to those relying on it and correct it. Delaying at management's request or fixing it silently compromises integrity and openness. Selective disclosure to only the regulator also leaves the board misinformed.
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