CIA Auditing Principles & Procedures 4

Question 1

When using attribute sampling in an insurance audit, the auditor is measuring:

Accepted Answer

The rate of occurrence of a specific control deviation

Answer

Attribute sampling estimates the frequency (rate) at which a control fails to operate as intended.

Question 2

In statistical sampling for insurance audits, a higher tolerable error rate allows the auditor to:

Accepted Answer

Reduce the required sample size

Answer

A higher tolerable error rate means the auditor can accept more deviation, requiring fewer items to be tested to reach a conclusion.

Question 3

An auditor is testing claim payments for proper authorization. The auditor finds 4 deviations in a sample of 100. What is the sample deviation rate?

Accepted Answer

4%

Answer

Sample deviation rate = deviations found ÷ sample size = 4 ÷ 100 = 4%.

Question 4

Substantive testing in an insurance audit is designed to:

Accepted Answer

Detect material misstatements in account balances or transactions

Answer

Substantive tests provide direct evidence about whether financial statement amounts and disclosures are free from material misstatement.

Question 5

Which procedure is MOST appropriate for testing the completeness of reported claims liabilities?

Accepted Answer

Reviewing subsequent payments and new claims reported after the balance sheet date

Answer

Testing subsequent claim payments and late-reported claims helps identify liabilities that existed at year-end but were not recorded.

(CIA) Certified Insurance Appraiser Practice Test