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CMA Intermediate · Corporate Accounting and Auditing · Auditing of Different Types of Undertakings

Which of the following is a specific audit consideration when auditing claims outstanding of a general insurer?

The auditor should examine the adequacy of provisions for claims intimated but unsettled and for claims incurred but not reported, since these are estimate-heavy liabilities needing checks of surveyor reports, subsequent settlements and actuarial methods.

  1. AAdequacy of provision for claims incurred but not reported (IBNR) and claims intimated but not settledCorrect
  2. BWhether the company has issued bonus shares
  3. CWhether depreciation is charged on land
  4. DWhether the registered office is rented

Explanation

Claims outstanding include estimated liability for intimated claims and IBNR, which require estimates and often actuarial support. The auditor tests survey reports, subsequent settlements and the estimation method. The other options are unrelated to claims liability.

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