AA – Nov 2020 – L2 – Q1d – Audit Evidence

List and explain audit procedures appropriate for auditing gross premium income in an insurance company.

Question

List and explain the type of audit procedures that might be appropriate in the audit of gross premium income.

Answer

Obtain a schedule of gross premium income from the company or make a schedule of gross premium income.
Cast the schedule for accuracy and agree it to the gross premium ledger of the company.
Review the company’s internal controls on premium income to ensure compliance with relevant regulations.
Review a sample of policy files to ensure accuracy of gross premium income recorded.
Trace the sample of premium income through the books of the underwriter and bank statements to verify completeness.
Ensure compliance with the Insurance Act, NAICOM regulations, and other industry standards on premium recognition.