Audit of an Insurance Company
Mandatory audit of the annual financial statements
Go to the Mandatory Audit serviceChecked against the official source:
Insurance companies are named on the list in Article 35 of the Law "On Auditing Activity": the mandatory audit applies to them every year, regardless of the volume of premiums written.
The central question in such an audit is the adequacy of insurance reserves: whether the financial statements reflect the insurer's real financial position depends on how they are measured.
Legal requirements
- insurance companies are subject to a mandatory annual audit (Article 35 of Law ZRU-677);
- a copy of the audit report goes to the tax authorities no later than 15 June;
- the auditor must be a firm with at least two auditors who have at least three years of experience or an international certificate.
Key audit areas
- Completeness of premium recognition and correct allocation of premiums to periods
- Calculation and adequacy of insurance reserves
- Claims settlement: recognition of reported claims and claims incurred but not reported
- Reinsurance transactions and settlements with reinsurers
- Investment of insurance reserves and measurement of the related assets
Why reserves are the main risk
An insurance reserve is an estimate: it is calculated using a methodology rather than taken from a source document. An error in the methodology or in the input data directly distorts the financial result, so the auditor checks not only the arithmetic but also how well-founded the assumptions themselves are.
What you receive
At the end of the audit you receive an audit report in the form set by Article 39 of Law ZRU-677 and a management letter describing the weaknesses found in accounting and internal control. For management, the second document is usually more valuable than the wording of the opinion itself.
Arrange an insurance company audit
We will agree the scope of the audit based on your lines of insurance and the structure of your portfolio.
Go to the Mandatory Audit serviceFrequently asked questions
Does the auditor check whether insurance rates are correct?
Pricing policy as such is not the subject of a financial statement audit. The auditor assesses how its results are reflected in the accounts and whether the reserves recognised are adequate.
Is an audit mandatory for an insurance company?
Yes, every year (Article 35 of Law ZRU-677).
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