CIA.CSOP Flashcards
Briefly describe when an actuarial approximation is “appropriate”
An approximation is appropriate if it reduces the cost of, reduces the time needed for, or improves the actuary’s control over, work without affecting the results
When should an actuary report the use of an approximation
When the appropriateness of an approximation is doubtful
Identify an example of an approximation that is “appropriate”
A simplification of an assumption may be an appropriate approximation.
For ex:
- Accidents occur continously over a year; for simplicity, assume that they all occur at the middle of the year
Identify an example of an approximation that is “not appropritate”
Omitting a certain portion of the data to approximate a general result for the entirety of the data
Sufficiency & Reliability - Data is sufficient when
Data are sufficient if they include the needed information for the work.
Sufficiency & Reliability - Data are reliable when
Data are reliable if they are sufficiently complete, consistent, and accurate for the purposes of the work
1460 - Quality Assurance: Guideline for Actuaries
The actuary should implement appropriate quality assurance processes prior to the release of work to users
1460 - Quality Assurance: Identify examples of quality assurance processes (4)
- Validate calculations
- Validate models
- Repetition of the work
- Peer review
1460 - Quality Assurance: Identify considerations in determining what quality assurance processes to perform (5)
- The purpose of the work and the extent (if any) to which the users may reasonably be expected to challenge it
- The significance of the work, including any financial, reputation or other consequences to the user
- The reasonable expectations of the users
- Whether the way in which the work is carried out makes it vulnerable to errors
- Whether there are legislative or regulatory requirements for the work to be peer reviewed
1490 - Documentation: the actuary’s documentation for a model, if required, would typically include
- The intended purpose of the model
- The appropriateness of the model specification for the intended purpose
- The limitations of the model specification relevant to the model’s intended purpose
- The testing of the model implementation
- The presence of the appropriate mitigating strategies for model risk
Identify items an actuary should consider before using another person’s work
- Early and periodic communication with the other person
- Confidence in the other person’s qualifications, competence, integrity, and objectivity
- The other person’s awareness of how the actuary intends to use the other person’s work
Identify the purpose of the CIA/CICA Joint Policy Statement (3)
JPS discusses:
- Communications between actuaries involved in the preparation of financial statements, and auditors, regarding their respective responsibilities
- Interaction between auditor & actuary while carrying out their respective reponsibilities
- Disclosure of responsibilities of auditor & actuary to readers of financial statements
Define “enquiring professional”
A professional who relies on the work of another (responding professional) in the course of their own work
Define “responding professional”
A professional whose work is being used by another (enquiring professional)
Define “auditor” in the context of the Joint Policy Statement
Means an auditor who has been appointed to perform an audit and report on financial statements or to perform specified procedures on data
Define “auditor’s actuary” in the context of the Joint Policy Statement
means an appropriately qualified actuary who assist the auditor in assessing risk and performing further audit procedures to respond to assessed risk
Identify management’s responsibilities under JPS regarding financial statements
Management has overall responsibility for F/S (may include amounts determined by actuary)
Identify actuary’s responsibility under JPS regarding financial statements
Actuary is responsible for Reliability & Sufficiency of data
Actuary IS NOT responsible for data integrity or controls (may enquire of auditor regarding these items)
Identify auditor’s responsibility under JPS regarding financial statements
Auditor is responsible for integrity of financial statements (financial position, operations, cash flows)
Auditor IS NOT responsible for the actuarial valuation (may enquire of actuary regarding valuation)
In communication between the enquiring & responding professional, briefly describe 3 specific actions the enquiring professional would take
- Request confirmation from the responding professional that they have been engaged by the shareholders, policyholders, directors, or management to do the work that the enquiring professional intends to consider
- Request confirmation from the responding professional that they are a professional in good standing
- Request confirmation from the responding professional that they will carry out the work required in accordance with the applicable professional standards
In communication between the enquiring & responding professional, briefly describe 3 specific actions the responding professional would take
- Confirm that they have been engaged by the shareholders, policyholders, directors, or management to do the work that the enquiring professional intends to consider
- Confirm that they are a professional in good standing
- Confirm that this work will be carried out in accordance with the applicable professional standards
Identify 3 items in the responding professional’s written response to the enquiring professional after completion of the work
- Identify the purpose of the work
- Identify the financial statements or data to which it relates
- Identify the responding professional’s relationship to the entity to which the financial statements or data pertain
Identify & briefly describe 4 types of actuarial reports according to CSOP 1700
External Report
- Formal & detailed
- Range of appropriate reports is narrow (narrower than for internal reports)
Internal Report
- May be formal & detailed OR informal & abberviated depending on use & user
- Range of appropriate reports is wide (wider than for external reports)
Oral Report
- Useful to an internal user
- Disadvantage (vs internal report) is that there is no written record
Summary Report:
- A simplified way to communcate actuary’s analysis
- May be part of an external or internal report
Identify items included in an external report according to CSOP 1700
- Identify the client or employer
- Describe the work, its purpose, and its users
- Statement that it may not be appropriate for other uses
- Statment about whether AAP was used
- Assumptions (and justifications)
- Methods (descriptions of)
- Reservations or qualifications (if any)
- Express an opinion on assumptions, methods & result of the work
Give 3 examples of unintended reservations which may mislead the user
- Disclosure of an appropriate approximation may mislead user by implying that the actuary’s work falls short of AAP
- Disclosure if the actuary does take full responsibility for the used work may mislead the user (disclosure when not taking full responsibility is appropriate)
- Deviation from a particular recommendation or other guidance standards when the result of doing so is immaterial and disclosing it may mislead the user
Identify the scope of CSOP 2600 regarding deviation & recommendation of rates
Deviations of rates are within the scope
Recommendation of rates to charge are not within the scope
