• 1 Marks

AAA – Nov 2011 – L3 – SA – Q2 – Audit of Specialized Industries

Focuses on the key provision auditors should prioritize in insurance company audits.

In conducting the audit of an insurance company, to which ONE of the following should the auditor pay special attention?

  • A. Provision for depreciation
  • B. Provision for unearned interest
  • C. Provision for loan losses
  • D. Provision for outstanding claims
  • E. Provision for general reserve

D

Explanation: The answer is D. Provision for outstanding claims. Auditors of insurance companies should give special attention to the provision for outstanding claims, as it directly affects the company’s liabilities and financial health. Accurate estimation of outstanding claims is crucial, given that insurance companies rely on reserves to cover future claims and policyholder obligations.

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