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

While auditing a life insurer, the auditor wants assurance on the adequacy of policy liabilities (reserves for future policy benefits). On whose work should the auditor primarily rely, as a management's expert, for this estimate?

The auditor should rely on the appointed actuary, because actuarial valuation of policy liabilities is a specialised estimate made by that expert; the auditor evaluates the actuary's competence and work rather than recomputing the reserves personally.

  1. AThe appointed actuaryCorrect
  2. BThe company secretary
  3. CThe internal auditor
  4. DThe cost auditor

Explanation

Policy liabilities in a life insurer are determined by the appointed actuary, who certifies them. The auditor relies on this expert's work after evaluating competence, objectivity and appropriateness, as in the standard on using a management's expert. The other persons do not compute actuarial liabilities.

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