An audit is a crucial activity in every organization in the conduct of its business as well as the prevention of fraud which is a common issue in any business entity. A strong and rigorous system of internal control must be in place and implemented to detect and prevent different kinds of fraud and accounting irregularities.
In the insurance industry, an audit insurance company is essential to handle the audit area of the business. The complexity and sophistication of the accounting process of an insurance business require proper audit controls and necessary audit system to create a well-organized flow of business transactions.
The roles of the auditors of an audit insurance company are interrelated with the accounting process of the insurance company. The auditors are responsible for the examination of tax documents, liability and policy procedures, and other various financial insurance records. This is to ascertain that insurance premiums and rates are properly implemented and tax laws are diligently followed by all insurance companies. The hired audit insurance company will also verify the commissions and claims which are core areas in the business. Insurance auditors are expected to develop strong quality controls between the policyholders and the insurance companies.
Important audit areas in the profit and loss of an insurance company:
- Premium verification
Before starting the premium verification income, the auditor must check the compliance of the internal controls that are placed for recording and collection of premiums. There must be a serial number in every cover note. The auditor must also verify the matching of premiums in the record and in the general ledger.
- Claims verification
The auditor must ensure that all claims are settled as well as the veracity of the amount being claimed. A provision must be in place to handle unsettled claims.
- Commission verification
Accurate and timely release of commissions of agents is important to motivate and encourage them to perform well. This will prevent issues that can affect the revenue of the business.
- Operating expenses verification
Proper checking of operating expenses is important to reflect an accurate record in the financial statements as well as determine possible ways of managing the expenses when necessary.
The role of auditors in the insurance business contributes much to the development of risk coverage of the insurance business and the well-being of the insured,