INSURANCE

INDUSTRY
 Learning Objectives
Understand how insurance companies operate;
Identify characteristics of an insurance company that make it different from
other commercial enterprises as well as their similarities;
Discuss the audit process of insurance companies;
Explain why special considerations in audit of insurance companies are
conducted;
Examine a financial statement of an insurance company and identify risky
accounts in auditing such; and
Recognize trends in insurance sector.
 What is INSURANCE COMPANY ?

 Financial Institution
 Insurance Policies
 Risk of Financial Losses
 Pooling Risks
How insurance works?
Types of insurance companies
 NON-LIFE INSURANCE
It is a policy that provides compensation
for losses incurred from a specific financial
event. This type of policy is also known as
general insurance , or property and
casualty insurance.
 LIFE INSURANCE
It is a contract between an insurer and a policy
owner. A life insurance policy guarantees the
insurer pays a sum of money to named
beneficiaries when the injured dies in exchange
for the premiums paid by the policyholder
during their lifetime.
 Important Differences
NON-LIFE
VARRYING CONTRACT Short-term
VARIATIONS
No certainty of the event
PROBABILITY OF THE EVENT happening. Policies are
INSURED OCCURING intended to protect and
compensate the insured
against their financial loss in
the event of an unforeseen
occurrence.
Any other risk such as the risk
RISK COVERED of damage to property,
reputation, terrorism, etc.
LIFE
Long-term
The event is certain to happen.
The only uncertainty is the
timing of the event an whether
the policy will be in force at the
time.
Life risk include mortality,
morbidity and longevity.
 Insurance Commission
Insurance Commission is an attached agency of the
Department of Finance (DOF). It committed to protect
the interest and welfare of the insuring public and to
develop and strengthen the insurance industry. As
Regulator, they provide an opportunity for every Filipino
to secure insurance protection and we shall observe
practices at par with regional and global standards.
 Audit Process
 Preliminary work
 Risk Assessment procedures
 Evaluation of Internal Control
 Performing Substantive Procedures
 Performing an opinion and Reporting Considerations
 Preliminary work
 Understanding about organizational culture
 Study internal control system and test reliability
 Check minutes of board meetings
 Need to ask the expertise of an actuaries
 Accounts are prepared as per norms of applicable Acts
(REPUBLIC ACT NO. 10607)
Risk Assessment Procedures

 Inherent risk and control

Internal Audit

1.Control structure
2.Control procedure
3.Information communication
4.Monitoring
Substantive Procedures

 Inspection
 Observation
 Inquiry
 Recalculation
Forming an Opinion and Reporting
Considerations

 Evaluate whether the financial statements

provide adequate disclosures to enable to
intended users to understand the effect of
material transactions and events on the
information conveyed in the financial statements.
Key Audit Considerations