Question

List two ways can test the existence and completeness of insurance policies.

Answer 1

ways to check existence and completeness of insurance policies:

1. Analytical procedures: analytical procedures means evaluation of financial information through analysis of plausible relationships of both financial and non-financial data. As a measure of judging the overall reasonableness of the amounts attributed to the insurance policy, the auditor may relate the amount receivable at the maturity of the policy with the corresponding figures of premium paid over the years and compare the ratios obtained to similar ratios of other insurance providers. For this purpose the policies can be classified into different categories like Fire insurance. General Insurance, etc and similar analytical procedures can be performed on each category of insurance.

2. Transaction Trails: An audit trail can either be a paper or electronically based trail that provides a documented history of a transaction within an entity. such trails allow the auditor to trace the financial data and view the full process of a given transaction. in this IT driven world, transaction trails are not difficult to find. in case of Insurance policies the auditor can take a look at the transaction trails starting from planning of policy to maturity of the policy. The auditor can easily check the completeness and existence of the policy by comparing the actual sequence of the transaction and the ideal transaction trai

the ideal trail of insurance policy must be
determine the requirement of the policy>check availability of alternatives>select best alternative>take approval of management>aquire the insurance policy>payment of premium when due>claim insurance in case of any contingency or maturity.