CIA.Mat

Question 1

define materiality

Answer 1

an OUO (omission, understatement or overstatement) is material if the actuary expects it to materially affect the user’s decision making or reasonable expectations

Question 1

what materiality is not

Answer 1

NOT
- a range of reasonable values around actuarial estimate
- inherent uncertainty in an actuarial estimate

Question 2

identify the main consideration in setting a materiality level

Answer 2

specify:
- use of work, intended users
- there is no obligation to communicate with other than intended audience

Question 3

identify circumstances where the materiality level should change

Answer 3

• when an external benchmark is approached (e.g. regulatory action level)
• otherwise, it should be consistent over time and between valuations

Question 4

identify characteristics of an insurance company that may affect materiality

Answer 4

F-STARS
- Financial Strength
- Size of entity
- Type of business
- Access to capital
- Net retention
- Stage of organizational life cycle

Question 5

identify a metric to test materiality for regulatory or solvency purposes

Answer 5

• statutory surplus
• solvency benchmark ratio

Question 6

identify a metric to test materiality for appraisals

Answer 6

• net worth
• net income
• EPS (Earnings Per Share)

Question 7

identify a metric to test materiality for general purpose of financial statements

Answer 7

• statutory surplus
• net income

Question 8

identify which application has a less rigorous materiality level, DCAT or Valuation

Answer 8

DCAT is less rigorous严格的 -> higher materiality standard
DCAT:
- used for surplus in scenario testing
Valuation:
- this impacts net income, which is more important
- need to detect smaller deviations here

Question 9

considerations for extend of disclosure of materiality

Answer 9

• sophistication of user
• important of concept to user
• complexity of concept

Question 10

possible actions of report writer based on materiality

Answer 10

• include? whether item should be considered
• refine? whether item is sufficiently accurate
• disclose? whether item should be reported